Jewel Bears have made a killing?
It's been just a little more than a week since the Jewel Bazaar on the Earth2 website opened up, and in general we have seen Jewel prices crash daily over successive days since then. The Yellow Jewels, which is the top end of the market, has seen its value plummet from over $2 to under 80 cents at the time of writing. The trend is similar for other Jewels as well.
Bears have been shorting the Jewels almost daily in the hope to catch the Jewels at a lower price. 'Shorting' means you sell an asset at current prices hoping that the prices will go lower in future and you can buy them back for cheap - or more of them with the same dollar amount. Key question is will this go the way of the bears or will the conviction of Bulls be rewarded. Bulls on the other hand feel the current prices are well below the intrinsic value. However much of the conviction on either side is based on very little info on how ultimately will Jewels be a gamechanger (if even).
Fair price of Jewels has been difficult to arrive at due to many factors but mainly because we have little insight on below questions :-
1) What is the steady spawn rate of Jewels ? Of late users have seen spawn rates increase than before bazaar opened up.
2) What will be the rate of spawn of resources, for Jewels to make a big difference
3) Most importantly what the resources will trade at, which will give us an implied value of the Jewels corresponding to that resource
However any insights to above will remain elusive till we actually have resources launch, so the true value of Jewels is currently more of a guesswork.
Additionally, the Bazaar design could have been better for an efficient price discovery. Below are few features I think can add a lot of value:-
1) Market-Depth style trading mechanism - where users can put buy/sell bids and orders get matched accordingly 2) Or at the minimum, the ability to list Jewels by specifying a quantity instead of listing one-by-one 3) Most importantly - I feel the transaction fee on Jewels is very high for an efficient market functioning. Basis current situation, fees seems to be upwards of 15% in most cases per transaction (E$0.1 fees for E$0.8 yellow, 0.03 fees for 0.2 base level jewels). An typical efficient market has low fees to encourage participation from market makers and thus reducing the volatility. A high spread prevents any market-making and thus doesn't offer support at the buy side - moreover since currently the fees is entirely borne by the buyers.
A few things I feel could sway Jewel prices either way in the coming days:-
1) If there is some additional info on their future use or why people are better off holding them versus selling now. Well even Elon talks up $Doge - so a tweet or two on their utility wont hurt (cough, cough) 2) How will people react once Holo buildings become available for deployment. There could be players who would have planned to fund the holo-building costs by selling Jewels
3) Once crafting becomes available the demand to merge Jewels for a higher Jewel could support the Jewel pricing.
However, for now, bears are sitting pretty having sold at higher rates. One wonders that when there is any sort of announcement will bears have enough time to buy back all those dumped Jewels? Both sides have their theories, who do you think will win?