Starting A New Blogging Series
Hello everyone, after a good reception to my previous post about SPS (which you can find HERE) I thought I would start up a blogging series about developments in the Splinterlands economy. My goal is to break down what is happening to a specific asset and give my thoughts about what is in store in the future.
Disclaimer
Nothing I write is intended to be investment advice, please do your own research before making any purchases. I do not have a crystal ball and all my opinions are just that, opinions! I will also disclose my holdings beforehand to remain transparent.
Disclaimer Pt. 2
I own 2 plots of land.
Crazy Price Movement For Land Plots
Wowee it seems like plot prices have exploded over the last two months. Even over the last few days we have seen some strong upward price movement, just take a look at the Leodex chart:
Exactly two months ago on 6/13/2021 plots were trading at 80 HIVE (~$37.6). Now the cheapest plot for sale is at an all time high of 788 HIVE (~$382), that's some insane growth!! As everyone should know land has not been implemented in the game yet so it does not have a concrete use case. So what is driving the price up for land?
The SPS Airdrop
If you read my last post you know that land provides a decent chunk of airdrop points, simply by owning land you will receive SPS. I think this is a strong driver of the price, its no coincidence that the price started a strong upward trend right around late July when the SPS airdrop was announced. If you bought a plot today and held it until the end of the airdrop you would earn 590 SPS valued at $185. That recoups about half of the cost of buying the land assuming a price of $380. Because a large portion of the cost of land will (hopefully) be 'refunded' through the airdrop it makes purchasers much more confident when investing. I believe this trend will continue into the short term and fall off slowly over time. The value of the SPS airdrop diminishes over time as there will be less days left in the airdrop, meaning you will receive less SPS if you buy a plot of land later in the year.
Scarcity
One thing is obvious, very few people are willing to sell their plots right now. From an investment standpoint the holders of land are missing out on free money if they sell now - they would not receive the SPS from the airdrop. Overnight the SPS airdrop added real world value to the plots and as a result landholders are much more reluctant to let go of their assets. This is very evident in the orderbook on the plot marketplace:
As you can see there are very few plots for sale now, the number has progressively shrunk over the last few days. Buyers vastly outweigh sellers which means sellers are either patiently waiting for the buyers to come to them or are not even listing their plots on the market. Take a look at the recent transactions:
Very few sellers are fulfilling buy orders, all the buyers are filling the sell orders. That means the sellers control the market. Moving forward I think this trend will continue. Land holders will continue to hodl, if prices remain high enough we may see some whales take profit and sell some of their holdings but at current rates I think supply will remain low.
Inherent Land Value
We are fast approaching a time where more details surrounding land use will be released. As we learn more about land and have more concrete details I think that hype will increase and so will price. In anticipation of more details releasing we may have begun to see an uptick in prices.
High Demand
We have seen a large influx of new players recently (I am one of them). I believe a sizable segment of these players are itching to get involved with the Splinterlands community and invest. New players also tend to be less price sensitive to previous increases. Older Splinterlands players know that land was available for purchase for $20 a plot in the presale so they will be more resistant to the idea of buying land at $350. New players don't have the same biases, especially when comparing land prices to other blockchain and NFT games. Take Axie Infinity for example, they have seen massive price increases in their land (cheapest one on the Axie marketplace is $12,000!!!!) so compared to those astronomically high prices $350 seems relatively tame. Newer players wanting to get in on the action will be much more likely to drop a few hundred dollars for a plot or two. This buying activity drives up prices and contributes to the lower supply.
Thoughts On Future Prices
At the very least I think these higher land prices are here to stay in the short and medium terms. The SPS airdrop adds too much value for land holders to be interested in selling at the previous prices. If scarcity remains supreme prices will continue to rise as we have seen over the past few months. Long term (think 1 year and greater time horizons) the value of land depends on how it is implemented in the game and how valuable it's use cases are. If land lives up to the hype I think we could see some rapid appreciation in prices. One thing to consider is that not all plots are created equal, plots have different levels of rarity and different resources located on them. It probably goes without saying but more rare and productive land will be more expensive. Once that information is released land prices will become much more spread out.
