Today's article is one that's been brewing in my mind for over a month. Back on May 6th, 2021, Dogecoin hit an all-time high of 0.68 per coin. My two co-workers were both invested in it and were extremely bullish on it. All I would hear is that "it's going to the moon" all during its incredible rise that began on May 2nd. For those four days, it seemed like their willingness to hold onto it made them geniuses, as its meteoric rise continued. They kept saying that if it dropped, they would just buy more "into the dip," and then make even more money when it inevitably rose again.
While it certainly has risen a few times from lows it's currently sitting at $0.29 per coin as of me writing this. The days of my starry-eyed co-workers claiming it would hit $1 are gone. One of them sold it when it dropped down to $0.5, but the other is still holding. His buy-in was $0.29, so he is exactly where he started and has made $0 profit. Of course, I told him to sell when it was near $0.7. Doubling your money in less than two weeks was incredible in and of itself, and he should enjoy his profits. Unfortunately, he didn't. This isn't to say I have some supernatural predictive abilities; it's pure luck that I happened to emphasize how rare doubling up is on the same day that an asset hits its all-time high.
Why bring this up you might ask? All too often, I see the same overly optimistic bullish beliefs in the Magic finance world as well. I may be bursting some bubbles with this article, but in the long run, you will thank me.
Supply and Demand
Pretty much every economist agrees that the concept of supply and demand is what drives any business and the economy overall. If you make something nobody wants, then there is no demand. Thus, it doesn't matter how much supply you create if you don't make any money. If there is no supply of raw materials to make your product, it doesn't matter how badly people want it because you can't produce it. The latter is something we are starting to see a lot in the world today, as many businesses struggle to get the resources necessary to produce goods.
You can think of a card's current price as a reflection of both the supply in the marketplace and the demand for the card. If there were more demand for the card, the cheap copies would be purchased and the price would rise. If WotC reprints the card, then there is an increase in supply. We as MTG financiers are always hoping for the former with our cards and fear the latter.
I can tell you firsthand, thanks to the new Secret Lair Phyrexian Praetors: Compleat Edition that the small stack of Elesh Norn, Grand Cenobite's that I've been sitting on as a speculation target will not be bearing any fruit. There are two additional factors to supply and demand that are relatively new to Magic finance, especially given that its oldest possible existence is only 28 years.
Covid-19 Continual Effects
While COVID-19 is starting to get under control and vaccination levels continue to rise; it is still very much affecting demand for physical cardboard. While many local game stores have started hosting events with or without occupancy restrictions, WotC's current policy is not to hold any major events like MagicFests until the 2022-2023 season which is still 6 months away. We are starting to see a lot of movement on Modern staples as players build new decks with all the goodies from Modern Horizons 2. However, part of me strongly believes that without the ability to play those new decks in larger events the excitement will wane.
It's also important to keep in mind that a lot of card price increases over the past 12 months have been tied to stimulus spending. Many people got what they viewed as "free money" and those who were Magic players bought cards they typically might not have. If we get more stimulus money, we may see additional price increases. If we don't, then anyone expecting the overall price trend to keep going up will be sorely disappointed.
Another concern that is still flying relatively low under most people's radar, at least here in the US, is general inflation which has reached a high not seen in over a decade. While experts are split on how long it will last, the fact that it's possible to last a while may end up cutting into card demands in the coming months. The price of many goods increases during times of inflation and that includes essential items like food. While Magic is often called "cardboard crack", most would prefer to eat and have a roof over their heads than have a new Modern deck. If tough decisions have to be made, we could easily see staple supply rise and prices drop back down.
For those wondering why I had to title this article "Tempering Expectations Revisited" it's because way back in 2016 I used the same title to go over the same subject. But it's always good to get a refresher every once in a while. A lot has changed since I wrote that article, the woman I went to McAdenville with is now my wife and mother of our child and I've started a new career, but the article still remains true as ever. Were you a very bullish speculator when you began this article? Are you still one now? If so, I'd love to hear your reasoning in the comments below.