Unlocked Insider: Can the Market Be Moved?

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Talk of market manipulation arose last week, as Splinter Twin was rapidly climbing from $4 to $10. While some of us were ahead of the curve, others were not. And some of those people, possibly after having their orders canceled, suggested the spike had been deliberately orchestrated.

This argument pops up over and over again. Whenever a card takes off and the market quickly drives up, a certain subset of people want to blame “speculators” for the spike. After all, if not for all those faceless, evil people buying up copies of a card, all the players in the world could have their copies.

I hope this sounds as ridiculous to you as it does to me. There are a myriad of reasons why it doesn’t work like this, which I’ll delve into today. But I’ll start with the premise that 99 percent of the time it’s impossible for speculators to create a significant and —vitally— lasting impact on the market. After all, as Jason said, if it were that easy, Séance would be $10 and he would own his house.

Setting the Record Straight

Frustrated by this the other night, I posted this on the MTGFinance subreddit addressing the subject briefly. I want to elaborate on the subject today.

Being ahead of a spike is not the same as causing it, which is pretty much what it all boils down to. I tend to group price spikes into one of three categories.

  1. A clear buyout, with no tournaments results or even hype to back it up. This is your Aluren or Hall of the Bandit Lord, where the card jumps after being bought out but can’t sustain the new price because there is no demand. Six months later it’s back to where it began.
  2. Overnight spikes. These are difficult to predict and are usually the result of a breakout Pro Tour deck or an unbanning. This is also where frustrated speculators get their orders cancelled. These spikes hit a high point a day or two after the first movement, and cool off from there.
  3. Predictable rises that can grow slowly or spike if attention is drawn to them. This is Splinter Twin. The card was dwindling in supply and getting hot in Europe (all things we discussed in the forums). When people began to catch on in the US it started a run on the card, which turned a slow burner into a hot riser.

Telling the Difference

Sometimes you can only tell in retrospect which category a spike falls into. There’s usually little way of knowing if something that starts in Category 1 or 2 can make it into Category 3, where it holds its price. Usually, though, these things don’t happen. There are also times where cards we lump into Category 3 (Birthing Pod, for instance) never seem to take off, for whatever reason.

I’ll also tell you this. The money is not to be made in Category 1 or 2. Sure, we should all try to buy stores out when there’s a rush on a card in Category 2, and sometimes following the lead in Category 1 will make you money. But these are fraught with risks, namely stores canceling orders or the risk of buying in too late.

Category 3, on the other hand, is where we want to live, and it’s the kind of specs I work with and share on here. Jace, Architect of Thought, Blood Baron of Vizkopa, Aetherling, Splinter Twin and Spellskite are all cards in this category that I’ve written about in the past year--many of those have made us money.

But the fact that I called these “predictable” raises the question: If it’s so predictable, why doesn’t everyone know about it?

Because most Magic players simply aren’t interested in that aspect of the game. They want to get their Standard cards when they need them, and that’s that. There was no doubt that Jace was going to see more play this season, and yet the price spike happened anyway.

The biggest difference between Category 1 and the other two is that Category 2 and 3 spikes come as a result of actual demand. Even if that demand is only hype, as it sometimes turns out to be in Category 2, it’s real demand. If a card sees sustained demand after a spike, it will continue rising slowly or even jump again, as fetchlands did earlier this year.

Moving the Market?

So back to the central question at hand: Can the market be manipulated through buying out copies of a card, as some have suggested happened with Splinter Twin?

Logic tells us that if you can create demand for a card while removing supply, prices will rise. But it turns out that creating demand is nowhere near as easy as simply removing supply. It doesn’t matter if I own every Oath of the Ancient Wood in the world if no one wants to buy it.

This is why you can’t ever “manipulate” the market in this way. We, as speculators, cannot create demand where there is none. Even one pro cannot create enough demand to significantly alter the price of a card.

A group of them theoretically could (as some have erroneously accused Star City Games of doing in the past), but that’s a self-correcting problem. SCG pros hype a card and people buy in as the price rises; it then does nothing and the price falls back down. Maybe it works once, but it comes at the cost of both the individuals’ and the company’s credibility, which is why this practice doesn’t occur.

The few times we have seen this happen (Hall of the Bandit Lord), it doesn’t really work out. Remember, your hypothetical market manipulator must unload the cards for more than they bought in for (after all expenses) in order to turn a profit. That means they not only have to move the TCGMid price (by buying all the copies then relisting much higher), they have to actually sell enough cards at that price to profit from it.

But we’ve already established that you can’t create demand out of thin air, and the speculating community has grown savvy enough to not just jump on every price hike. And if no one is buying these en masse from stores (as they would if the card saw actual demand), buylists just don’t move. Buylists on Aluren barely moved, and the same goes for Hall of the Bandit Lord. All of these factors make it very difficult to make this sort of play profitable.

Here’s another argument. If this worked, we would see it more often. There are a ton of cards out there with low supply I could go buy out today. The same goes for a lot of companies with a lot more money to throw around than I do. If this were truly possible, it would be happening. We would see new, random cards being bought out every week to run this scheme.

But it doesn’t happen. That should be enough to discredit this argument.

What About Real Cards?

Categories 2 and 3 are where speculators such as ourselves can actually move the market. We certainly are behind the overnight price spikes from Pro Tour breakouts like Nightveil Specter (though this saw heavy play in Block and I suggested trading into it even before the season began).

That said, even this wouldn’t happen if it were’t profitable the vast majority of the time. And why is it profitable? Because these are the new decks that Magic players want to play, and they’re buying at the new prices. That’s a sign of a healthy market, and again, being ahead of the curve doesn’t mean you’re manipulating it.

Now, onto Category 3 and the area where I feel Birthing Pod and Spellskite live right now.

If we, as a group, went and bought out Birthing Pod tonight, the price would probably double overnight despite not seeing any more play tomorrow than it does today. Does that mean we’re manipulating the market?

That depends. If no one buys in at the new price, we’re going to lose money on this, in which case we’ve failed miserably. If, however, people do buy in at the new price, it means the market can support the card at that price point, and buying in when the price was lower was a prudent decision.

That’s not manipulation, it’s speculation. If the market will support a price higher than the current price, and you exploit that difference, you’re not manipulating anything. You’re simply fulfilling a basic function of a capitalistic market, and there’s nothing wrong with that. That’s why we’re here, after all.

This is what people on the outside don’t understand. If I buy out a card and the price doubles overnight and stays at that new price, don’t blame me; blame the players buying from me at the new price.

That’s why the hate directed at SCG for the fetchland buyout is misplaced. They simply acted as a good business should. They did the same with Tarmogoyf and Dark Confidant.

There’s a reason they’re the largest store in the world. The company’s decision-makers, namely lead buyer Ben Bleiweiss, are very good at what they do. And when speculators get ahead of the market on Splinter Twin, a card that displayed all the signs of an incoming price correction, they aren’t manipulating the market. They’re doing what they do well.

That’s the market as I see it. The only way to truly manipulate it is to control both the supply and the demand, and that’s something that cannot be done.

Until next time, remember this: It’s our job to predict the market, not create it.

Thanks for reading,

Corbin Hosler

@Chosler88 on Twitter

4 thoughts on “Unlocked Insider: Can the Market Be Moved?

  1. Thanks for the article, Corbin. Your explanation of Category 3 was what I was going for in the Reddit post, and I couldn’t have asked for a better one.

  2. This article was very well done Corbin and I think it should be on the un-gated side of QS.

    These kinds of arguments are made with respect to manipulation attempts in traditional financial markets and prediction markets, but fortunately the situation is more simple in Magic because the feedback is mainly price -> price feedback, not price -> outcome feedback. In regular finance you have situations where shorting a company’s debt (because they are a shaky credit) raises their interest rates which could cause a spiral into irreversible bankruptcy. The equivalent of price -> outcome feedback in magic might be if people started brewing with Didgeridoo because of the price spike and then actually found a viable deck, but I guess you could just call that being accidentally ahead of the curve.

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