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Insider: Buyouts & The Fear of Missing Out

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Today's article is going to discuss the "fear of missing out," and how it relates to Magic buyouts. While this concept is most often attributed to social media and people's fear of missing what their friends are doing, it's something that has been around for ages. People naturally don't like missing out on opportunities and this fear can lead them to make poor or irrational decisions.

One of history's best examples is Tulip Mania in the Netherlands. When the tulip flower was first introduced to Europe, because it was so novel, it became a status symbol to own them. The flower was particularly beloved by the Dutch. People began spending extravagant amounts of money on the bulbs, and rampant speculation (as well as futures contracts) caused the bulbs to keep jumping in price. This made those who imported and/or cultivated them obscenely wealthy, right up until it the market collapsed.

This mania actually spawned the title, "The Madness of Crowds." Everyone began buying into the craze for fear of missing out on profits, and as they watched others make money they felt that fear was validated.

So how does this relate to Magic? Check the MTGStocks website.

Every day we see lots of Reserved List cards with significant percentage gains, many of which see no play in any format. These jumps are pure speculation (or direct market manipulation) and don't represent real demand—therefore the new prices aren't real. Sigmund covered this a fair amount in his articles on GP Columbus and the comparison to real estate.

Let's look at a few concrete examples of how this has played out recently in the Magic market.

Mox Diamond


Mox Diamond is a four-of in a few Legacy archetypes (Lands, Turbo Depths, etc.) so there's actually some demand for this card. However, that's a pretty high spread for an eternal staple.

But it gets even worse. Here are the vendor buylists (not just the top buylist price) for the FTV: Relics version:

  • Card Kingdom - $200
  • Adventures On - $35
  • Channel Fireball - $150
  • Star City Games - $150
  • Troll and Toad - $179.66
  • Coolstuff Inc - $150

The average buylist price is only $145.77, which puts the average spread at 60% or 40% of retail. Just as telling, the TCG Market price is only $185.34. So the last ones sold were closer to $185 than the supposed new price. This looks to be a speculation-driven buyout.

Ancestral Knowledge


Now let's look at a card that sees considerably less play than a staple like Mox Diamond.

Buylist prices on Ancestral Knowledge are around $1, which makes the spread something like 93%. This means that dealers have no desire to buy this card anywhere near its new "retail price." The market price is only $3.62, which also implies that nobody is buying at the new price (or anywhere near it).

Checking EDH REC, this card shows up in some Muldrotha, the Gravetide decks. However, it isn't an auto-include compared to something like Sakura-Tribe Elder, only serving as a psuedo-tutor (granted, one that can be repeated, but you have plenty of better cards in Sultai). This again looks like a speculation-driven spike.

Balduvian Trading Post


I tried to see if this card had ever found its way into any mainstream deck, but I found nothing. The ability is really weak, especially nowadays. Then I checked EDH REC and found that it's not used all that often, and the decks that did call it out seemed to be budget versions of popular commanders.

Yet somehow it managed to jump 343% this past week. So whoever bought this one...at least you'll have plenty of tinder to start a fire.

Thoughts

When we see massive spikes like these we need to dig a bit deeper. The fact that buylists don't seem to be adjusting means that stores don't have confidence in the new price. However, they are happy to try and sell the stock they do have at the newly inflated price, to players fearful that the card will only continue to get more expensive.

This is something both Sigmund and I noted at two different major events, however, neither of us saw any copies actually being sold at this price. So the dealers missed out on potential profits. After all, they paid their old buylist price for said copies, and likely could have sold their stock at considerably below the new TCGplayer price and still made solid profit margins (upwards of 40-45%).

Another problem with the dealers adjusting prices upward to match this manipulation is that it can seem as though they are validating the new price by matching it. This encourages people to pump and dump Reserved List cards, hoping to make a quick buck, but hurting the MTG singles economy. Like I stated, if there isn't real demand for the cards, most dealers won't up their buylists just because one person bought every copy they had.

We will also see dealers ration their inventory more now—for example, Card Kingdom only lets you buy eight copies of a card (in a specific condition) at a time. This allows the stores to opt out of some initial sales but have potentially larger profits as the buyout continues. As mentioned, this can ultimately mean missing out on sales in general, but it does seem like a smart way to hedge your bets.

The good news is that these types of money-making schemes have a way of fizzling. Magic players will simply stop trying to pick up these bought-out cards. The buyers will be left with a giant pile of non-liquid cards that dealers won't buy at any sort of inflated price, and they will simply have to sit on the cards (or sell out to dealers at a loss).

I've also started noticing a lot of backlash on the Facebook selling groups, where players who are likely the causes of said buyouts try to unload the cards at newly inflated prices, only to be mocked and run out.

It's also important to look at whether the cards have any actual demand. Some of these choices seem like some random person found a really cheap RL rare and decided to just buy up all the cheap copies without even bothering to see if it was played in anything. These people will be the first to learn their lesson; nobody was buying Balduvian Trading Post when it was $0.35—hence why it was $0.35—and nobody all of a sudden wants them now.

Another important takeaway is that the people who bought these cards out often try to move them as quickly as they come in. In order to do so they try to use all their possible outs (including Facebook), but doing so they "out" themselves and get a lot of negative feedback. I saw the guy who clearly had bought out Serra's Sanctum and tried to unload them on Facebook get spammed with angry comments and eventually have his thread deleted.

While MTG finance doesn't have any regulation body (like the SEC does for the stock market) it does semi-self-regulate in a certain way. These buyouts tend to upset a lot of players, and those players have no qualm with venting at the people responsible. If the buyers aren't able to unload their products, they'll end up selling to buylists and likely lose money (or gain very little) for all their troubles. Some will choose to just sit on the cards, but they lose out on potential profits from cards with actual demand as their money is tied up in their buyout card(s).

Conclusion

Basically, you can't force large-scale demand for a card. You might get some short-term profits from panicky buyers, but you're far more likely to watch the card drop as more people pull them out, hoping to cash in on the recent gains, and then race toward the bottom.

If you want a great example of this, look to Aluren.


There was a buyout in 2012 which caused the card to jump to $20. As you can see, it slowly fell back down to its pre-spike price. I know a lot of people think that a new price won't ever drop back down, and that a new floor will always be set, but this evidence indicates that isn't always the case (though it obviously can be).

The other aspect to consider is that buying out cards like this can hurt the game long-term, by discouraging new player base growth in eternal formats. While the old adage, "A rising tide raises all ships," remains true today, the same is true of a dropping tide.

One thought on “Insider: Buyouts & The Fear of Missing Out

  1. Near article, thanks for the shoutout. I do think in general after a card spikes, it sticks at a higher price point. But my strategy is always to sell into any spike / hype, even to buy lists for modest gains. This way I keep liquidity and am ready for the next spike. There’s always another.

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