Wednesday, December 3, 2014

Whither PLEX?

Here is a graph of recent PLEX prices, courtesy of eve-marketdata.com.  Note the long and relatively smooth ride up, then the peak indicated by the red dot, which was Nov. 19.  Then there is a small correction, with two other near-peaks on Nov 21 and Nov 24.  Then a steep decline, to where we are now.  Not enough data to say yet where it will go.  But we can analyze, and we need to decide whether to buy.  Thus, this article.
PLEX prices, past three months.
Price, as we know from microeconomics, is set by supply and demand.  Let's look at the market for PLEX.

There are several factors that I think are affecting the PLEX supply.  They are, in order of timing, the influx of "This-is-EVE" newbs, the ISBoxer policy change, and the Thanksgiving weekend PLEX sale.

"This is EVE" effect on new accounts.
The first factor is a bunch of newbs coming into the game.  Ordinarily EVE gets ~2000 new accounts per day; these include people trying the game out for the first time as well as old players creating new alts.  After the smashing success of the "This is EVE" video, which was released Nov 21, newbies flooded into the game  New account creation hit something like 8000 per day, briefly.  This has dropped back a lot, but the rate is still about 50% above normal, something like 3000 new accounts per day as I write.  I would guess that a high percentage of these accounts are new players, not just new alts.

(The image is from eve-offline.net.)

Some of these newbies are going to find out about PLEX and want to use one or two to kickstart their career.  Others (and I have spoken to two, now, out of perhaps several hundred newbies in the rookie channel whose questions I have answered) are going to want to jump right past the whole low-skill part of being a newbie, and drop a bundle to buy a skilled character.  For that they need two PLEX, plus a boatload of ISK.  So there is at least some additional demand.

Demand for PLEX can be supplied in two ways.  One is by spending ISK in the in-game market; the other is spending IRL money.  Obviously, few of these newbies are going to be able to PLEX with ISK for some time now.  They have low skills, as a character and a player.  So, we expect them to buy PLEX with IRL money and drop them into the game.  This will tend to depress prices.

Probably the main factor is the recent change in ISBoxer policy.  For some time now, ISBoxer has been tolerated by CCP.  Last week (Nov 25), CCP Falcon announced a change: no input multiplexing to anything in-game.  So, you can still use ISBoxer to log in many accounts, or to organize your windows.  But you cannot send input of any kind (i.e. mouse moves, keypresses) which affects the game to multiple clients.  This change takes effect on January 1.

Immediately upon this announcement, PLEX prices took a steep hit.  (Possibly slightly preceding it?)  This is the sharp downward move after the last peak is hit.  Obviously, people believe that because multiboxers almost exclusive PLEX their accounts (nobody pays IRL money for 20 accounts just to mine more ice), their demise will free up so much PLEX that it will significantly lower demand.

There is debate over how much of an effect the multiplexing ban will have.  Some say not much at all.  But in any case, since the ban is not even in effect yet, the reduced demand for PLEX that will happen on January 1 should have minimal effect.  Yes, there will be some reduced buying, for people that happen to PLEX their multiboxed accounts for months in advance.  And starting Dec 1 (well after the price dropped), there should be some multiboxing accounts that are starting to expire and are not being renewed.  But this effect should be minimal.

The stronger effect must be speculation.  I think that the PLEX selling is less a direct effect of the ban than indirect: because people believe it will reduce multiboxed mining a lot, they believe it will reduce PLEX demand.  As such, people think PLEX will drop, and then sell because of that -- a classic example of efficient markets pricing in all information immediately.

The final supply factor is the PLEX sale that happened starting on Friday, Nov 26.  This sale went on through the weekend.  PLEX sales don't usually tend to affect the price that much, but they do often have a small downward effect on prices.

Meanwhile, what about the demand side?

Well, there are evidently a lot of people like me.  I prefer to safeguard value in PLEX, not ISK.  As I have written: PLEX is money because it retains value much better than ISK.  As such, everyone should try to preserve value in PLEX.  And this is, evidently, what a substantial number of players do.

(There is a very interesting comment I saw by "Baki Yuku" at TheMittani, on this article about the input replication policy change:
PLEX price is where it is because people are using it as an invetment tool on a massive scale. According to CCP (last fanfest) only 45% of all PLEX injected into the market every month is being consumed. That means 65% are being brought as an investment.
Obviously it is hearsay and the math does not exactly add up.  But it does confirm my suspicion that a lot of PLEX is being used as money.)

I've been sitting on a pile of ISK for some time now, both my personal savings and my corporate savings.  However, because PLEX have been so expensive, I've been waiting for a correction.  Now PLEX drops, and there is a golden opportunity to buy.  I bought.  I think a bunch of people have.  So, collectively the demand to preserve value is sucking up excess supply.

There is one more modest factor on the demand side.  In Rhea, CCP is going to abolish clone grades.  Upgrading clones is an ISK-sink; it is about 3% of sunk ISK according the only data I am aware of on the subject.  Clone costs are basically going to go away entirely.  (CCP will raise the amount required to re-home your clone, but it is still quite cheap, and how often do people do that?)   Other things being equal, this move will marginally decrease the ability of ISK to safeguard wealth.  So PLEX win a bit here.

Summary: I think PLEX is a good buy.  All the fundamentals are there, other than possibly some decline in multiboxer demand.  But I think there is plenty of demand in New Eden for secure savings, that will offset that decline.

As previously mentioned, I have been buying PLEX for my corp and myself throughout the recent decline.  I got some at 900m, a few as low as 812m, and most around 830m.  If the price drops further, I may buy a few more, but I am mostly content with my ISK/PLEX balance.  We'll see if my purchases were wise or not.

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