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Wednesday, 9 April 2014

Plex as an inflation hedge

Since i started focusing on earning ISK last May (2013) there have been two facts that have required overcoming.

Firstly, because i don't want to spend more than 30 to 45 minutes a day focusing on ISK activities i have found that i have had surplus ISK which i can not invest, peaking at 35bn ISK in January 2014.  There are only two things i know about that ISK in my wallet: 1) It will be there tomorrow; and 2) it has no chance of earning more ISK whilst it is stuck in my wallett.

Secondly, there is inflation in EVE.  Prices are rising over time.  Player base is rising / more activity in the game gathering ISK / increasing wealth in the game . . . . . i have another post discussing this at a later date.

Hence, this ISK in my wallett is actually failing to keep its purchasing power.  It is worth less to me tomorrow than it is today.  Inflation is the silent thief of my wealth.

To solve this problem i ideally need to find something to invest my surplus ISK in to at least ensure it keeps up with inflation and so retains its purchasing power.

Hence, the ideal characteristics of such an investment would be:

  • Price linked somehow to the rising wealth in the game though i also want the price to be independent of individual specific items
  • Controlled supply - i want the supply of my investment to be limited or restrained so that as a scarce resource its value can grow as wealth in the game grows
  • Readily converted to ISK no matter what the environment - come war, peace, patch, expansion, you name it i want my investment to be recognised by all players at all times as something of value
  • Sufficiently liquid to convert to ISK in a short period of time - i.e. i can sell my investment very quickly into the market for a fair price
  • Power Proof - i don't want any player / alliance power base able to control the price of my investment
  • Patch / expansion proof - i don't want my investment to be materially reduced in value on the whim of a change in a patch or expansion.
In many ways, the only item in the game that i can think of which meets all these criteria is Plex.

Hence, i have started to invest my surplus ISK into Plex.  I aim to keep a float of 10bn ISK in my wallett and invest the rest into Plex.

I appreciate CCP has stated they will intervene if the price moves to their disliking but i believe over time the price of Plex will rise.



I suspect that this is not what CCP had in mind for Plex and indeed these actions, assuming others do the same, will start to distort the Plex market over time (the price of Plex in ISK will be higher than it should be given investors are entering the Plex market to buy and hold rather than buy and consume).

There are a number of things the Eve Central Bank could do to combat this such as charging a rental tax to hold Plex (5% tax for Plex held longer than 3 months, for example) though i can't think of anything that would not put downward pressure on Plex in the short term.

The best solution i would have is for Eve to end the issue of the current Plex and launch a new Plex (call it NewPlex).  The current Plex in issue will still be viable and can still be sold on the market.  The NewPlex would then carry that rental tax if held for over 3 months.

3 comments:

  1. When RL currencies buys gain more ISK for a PLEX, people will have to invest less in PLEX to get their ISK goals gone, so the ISK / PLEX market will also have a equilibrium. If speculators (who are not in it for keeping PLEX), will start dumping, the price will dip as deep as the normal trend, and thats a lot, I think a lot of people will be surprised the moment this happenes.

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  2. Very valid arguments for investing in PLEX. Although I would say that diversification is also an important strategy for long term investment. There are other items that at least qualify for most of your criteria that could be used too. I am thinking of ships or gift items that will never reenter the market but are very usefull in game at the same time. There are some of these items which also show these long term upwards trend that PLEX prices show.

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  3. I don't know how they'd work a tax on PLEX, I imagine the quickest solution to discourage hoarding would be for CCP to sell PLEX on the market. It would punish those who hold PLEX as it would cause the price to drop, it would also likely solve the inflation issue as it would remove ISK from the market and constrain monetary supply.

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