SPS Soars and the Whole Splinterlands Economy Follows Suit-Rentals Picking up Fast!

Just like that, the Splinterlands rental market comes ROARING back to life. And surprisingly, so have sales.

While we've seen higher daily gross values of around $30-35k before in mid-season, we've never seen 518k active rentals before. In fact, in the September lull, we dropped from the 400k average at the peak in August all the way down to about 310k where it remained until last week when it started trekking higher.

With DEC up at all time highs, the discrepancy in total value is simply because there are so many more people renting out their cards right now than there were in August. More inventory will lower prices after all.

While I am going to talk more about rentals and what I believe is happening and whether this bump is real or not, I'd like to touch on sales first because they are recovering at a rapid pace.

As you can see, over these past 11 days, the trend has turned from steadily down to steadily rising up. At the low it hit $124k worth of sales on September 25th. yesterday it closed out at $204K.
Now I drew a grey horizontal line across to show that as of now its back to about its center over the past 30 days so not out of the woods yet but certainly looking better.

The most encouraging aspect of the sales increase is that it's sending card valuations up across the board. There are several cards I track like Alric and Mylor and just the bottom of the gold card market which are all up. In Alpha Alric's case, that went from a high of $250 in August all the way down to $70 and is now back up to $180 even though there's far more on the market than there was in August. People are pulling their cards back and pricing them higher.

Mylor got to the mid $60's at a high, dropped to about $37 and is now back over $50.

Gold cards (not including the new rewards cards) got all the way down to a floor of $7 and are now back up to $12.

But again, this isn't just happening in the more expensive and rarer cards. Just a few days ago the floor price of all cards was .078 and as I write this, its .14!

Now to some degree I expected this. The CL launch press release gave a whole new value to older cards and especially beta cards which will now gain a dec bonus for using them. And we all know that Alpha cards should remain higher valued than Beta cards so a push up in Beta prices should also start to push up Alpha prices.

But also, the narrative for months has been that cards can't go up because everyone is waiting for CL.

So what happened?

Based on the price action I'm seeing, I'm expecting four things happened.

1. All these new policies designed to get people to move up to silver are working and people are buying floors and renting cards to build power.
2. Old cards are being revalued after the clarifications about the CL release and the devs continued attention of holding up their value.
3. New money is buying the dip to get involved.
4. Increased renting is driving increased buying as the value of holding the is increasing.

But there's something else happening too. Something that makes me both excited and weary.

Dec value is increasing.

Now, I'm not weary because Dec is increasing. Personally I'm all for Dec free floating its way much higher. What makes me weary is the temporary nature of it and what it means when it happens, vs what it means when it inevitably plateaus or even corrects down a bit like it did in September.

For those who don't know how Dec works. It's pretty simple. the main way dec is injected into the economy is through the rewards you get for winning a battle.

The devs decided they wanted Dec to be stable so they put in a an algorithm that would kick out more or less dec based on which way pricing pressure was going.

Now when Dec was .001 and Splinterlands had a few thousand players and no major reason to hold Dec, that meant small fluctuations in the amount of dec the algorithm would give out. If prices were being pressed higher, the simple answer was to give a little more Dec. This would increase the supply and that would stabilize prices.

If it was going down, the algorithm would get a little stingy and that would lower the incoming supply and make the price go up a little. The idea of course was to keep it right around .001.

Most people see what happened to splinterlands in July and August as a consequence of a lot of things like the SPS drop and the rental market. And that's partially right but I'd argue, what really made splinterlands boom was the consequences of the SPS market causing so much demand for Dec that it broke the algorithm which instead of paying out 3 dec for a bronze which meant you'd make a penny every 3 wins, it was now spitting out 40 de, which with its new increased value meant you'd make a dollar every 3 wins.

When this got around in places around the world where $5-10 extra dollars per day makes a big difference, the flood gates on new players opened which drove the demand for dec higher, which drove the price higher, which made the algorithm spit out even more.

And that happened until card prices were up 10-50x and so many people who used to play the game and had expensive cards came out of the woodwork to sell their now valuable assets they'd forgotten about. Then in the middle of that, the whole crypto market took a hit while there was a bot attack on the price of dec on hive-engine going on. This took the price from .008 to .005 in just a few days.

The result was simple, the algorithm reversed course. It began dropping less dec which was now also worth less. It actually got to the point where it was dropping not 40 or 50 in bronze but 5. And that 5 was now worth .005 each so while it was still better than it was when splinterlands was a sleepy little game, at .025 cents, it wasn't exactly encouraging people do use that new rental market feature or buy cards.

We saw everything slow and bots took over as the only profitable players. People who'd bought cards to play with them saw it as more profitable to rent them out and this meant lower rental prices. Even with lower prices though, 25% of the total active rentals dropped off. This increased inventory with decreased demand caused prices in rentals and sales to plummet and it was all blamed on CL coming.

Increasing DEC supply through rewards, increases demand

If you think of DEC for winning battles as your income, you will see that the more people make, the more they will spend. Dec is dynamic. Up to a point, the ore supply coming out, the more demand it creates where as the less there is coming into the economy, the less demand there is. This will work, as long as there are new players to come in.

So when I see all this growth returning right as I see the price of Dec going up, I'm excited because it shows all splinterlands has to do to grow to the stratosphere is balance their rewards better but I'm weary because I know it only takes a few bad days in dec to crush it all down again if we keep this algorithm in charge, which to my knowledge, it still is.

If you look at a 90 day chart of dec you can see in the price of Dec, every aspect of the last few months roller coaster ride. You can also see that we are currently back on out uptrend line after a month lull. As I'm writing this, hive just made a parabolic move up 96% in about 2 hours so who knows how that will effect things but for right now dec is back to business.

That was a much longer explanation than I'd intended but what I'm trying to show is the power of the Dec price when the algorithm gets involved in terms of building or slowing the economy. As long as that algorithm is on, fluctuations in Dec price can supercharge the economy as we saw mid-July through August and again in October or it can crush it down like it did in September.

So why is Dec up right now? The same reason it went up in July and August. To get more SPS. Back then people wanted SPS so they bought cards and Dec to up their Airdrop. Today there's a renewed interest as we now know that SPS is going to be one of the most important aspects of the game going forward with every new release being wrapped around a voucher system that is completely reliant on not an amount of SPS token, but a percentage of the whole of SPS tokens.

This is an important distinction because it means that even if you have a lot of SPS tokens now, you have to keep acquiring more to keep up with others or your stash will become less relevant to the game and gathering assets.

That means as long as there is SPS being printed, there will be a demand from whales to get more and from everyone else just trying to get something.

It also means it's going to be more and more expensive to catch up if you get behind in how much of the whole you own so selling it is a very bad idea if you care about being a whale.

And as of right now, the best way to get SPS is by buying it out right (which we saw when the price shot from .17 to .64) or holding lots of Dec and gold cards for the airdrop.

So this all means that Dec could ride that uptrend for a while still. And that would cause the algorithm to spit out those high rewards (like it's starting to again now), and that could cause more buying and renting, which will bring in more players with $$ in their eyes, and that could continue through until the end of the airdrop.

-But just like they just killed bronze for the longterm health of the game, this algorithm should go also-

And while that sounds great, I think it would be prudent for the Devs to think very hard about killing that algorithm off so we aren't at the mercy of the price of a single coin which can be manipulated up or down with a bot and $10k quite easily on hive engine right now.

We should look at stabilizing rewards somewhere close to where they are right now and letting Dec float completely free.

One more note. The devs did some controversial stuff recently to bronze league players I'd like to talk more about in a separate post as this one is way too long.

But like it or not, driving people to silver where rewards are higher has a similar effect as rewards increasing due to an algorithm. People getting silver rewards will buy more and rent more with those rewards on top of the fact that they need to buy more and rent more anyway just to get to silver. It's a great move from the devs in that sense.

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