Hi everyone,

the Steem Monster market has been around now for some weeks and I must admit that it has really added another layer of fascination to the game. Prices go up and prices go down, driven by fluctuations in supply and demand and many people have commented on methods to price these cards. In this post I would like to combine some of the different concepts and I my own thoughts on this.

We are not going to the moon - in the short term

First of all and most importantly: the overall price level is driven by an arbitrage function between the price you can sell the individual cards on the market and the price it costs to acquire the cards by buying packs. While there is some room for movement given that selling is a hassle to do and involves a lot of clicks and time and that you are facing a risk on what you find in the cards. But overall, the combination of all cards with their expected drop probability should more or less equal the price you pay for the equivalent number of packs. @monstermarket have generated great analysis on the relationship and their research shows that this arbitrage relationship works pretty well. The most recent post on this topic you can find here.

What could make the overall market go up?

As said, the overall price level is held back. So what could drive up prices nonetheless? From my point of view there is only two ways that the overall price level can increase:

1. A price increase for packs
2. Discontinuation of cards being produced

In the first case of a price increase, a new arbitrage relationship would be established. So if for example the price of a pack would be increased from 2 USD to 5 USD, the upper arbitrage boundry would be lifted by 150 %. Would this be a guarantee that prices go up massively? Certainly not as this is only the upper boundry for prices. If suddenly nobody would be interested in the game anymore because cards have become too expensive, prices could actually go down drastically. Therefore, this is most likely not the prime option to drive up prices.

In the second case, the developers would stop "printing" new cards for some or all of the currently available cards. this might be due to the fact that the current deck would be replaced with new cards or with a different release. This option has already been released by the development team in stating that the cards which are currently on the market will be marked as alpha edition cards. These will be replaced once fighting starts by Beta edition cards. This would take away the upper limit to the overall price level and alpha edition could then well increase drastically in value - assuming that the demand for the game continues to rise and more supply is generated for a then unchangeable supply of Alpha edition cards. So we have another 4 -8 weeks to go before we can finally see a significant increase in the overall price level.

But how to value the individual cards

While we can value the overall pricing for all cards pretty well at the moment, what is more difficult is to decide which card should be worth what. I see different concepts, with some being certain and some others not so certain. Let's start with a basic concept:

Basically, there is two reasons why anybody would buy cards:

1. Because he or she wants to play the card game
2. Because he or she is a collector or investor

Both types of buyers have different motives and their supply and demand curves will thus look differently.
Let's start with the collector:

Collectors as investors

The collector will clearly favour rare cards (and I do not mean the "rare" type cards), which are tough to get. The clear driver of the price they would be willing to pay for a card would thus be rarity or a the moment the drop rate, which is the driver of rarity. Asking yourself honestly, do you think that an investor would be willing to buy anything for a common card? Probably not as these are so common that everybody has lots of them. Maybe one could argue that a combined card would have a certain rarity value as not so many of them are available, but one should also keep in mind that this will change once fighting starts as you will be able to earn XP from fighting. Thus, even a level common card will at some point in time become a level 10 fully maxed out card. I would thus not bet on that.

For the rare cards the situation is more or less the same. Each rare card is only double as rare as a specific common card, but overall there is lots of them around. Also, they are even easier to level by fighting as your win probability is higher and the cards should thus level quicker. I would not buy rare cards because they are a collectible item. This will most likely start to be the case only with epics or even normal legendary cards. But even of those there is lots around and I think that the number of players and collectors would have to increase significantly in order for those to moon. Chances are there once the Alpha edition ends and if the adoption of the game goes viral, but I would not bet on it.

Collectors will in my view focus mainly on the Gold Foil cards, as these are in deed by far the rares and thus most difficult to get. Even the common Gold Foil cards are individually more rare than a normal legendary card. This is where i think is the biggest value potential in the long term as hopefully a strongly growing demand will meet an unchangeable supply soon.

Players will value cards based on their utility

The bigger number of card buyers will clearly be players, who want to use their cards to play the game. They will judge the value of each card by what they think is its utility value. A card's value or utility should here on average be driven by its win probability against other cards. Here, we are clearly still missing data to get a full picture - these are supposed to be published in the next 4 weeks. However, a few conclusions can already be made:

• A level 1 legendary card has a win probability of roughly 90% against a common card and 70% against an epic card. At max level, the advantage will fade, but remain an advantage. We think that this statistic will finally be the number which will drive the utility level. I will show you in example of what this means:

Let's assume that your are in the final fight of a tournament and the winner will win 100 SBD. One player has a maxed out legendary and the other player has a maxed out common card. While this is not a realistic example of what the game characteristics will look like, it is nonetheless a good example to show how the utility value can be calculated.

So let's assume for a moment that the legendary has a win probability of 70%, its expected win is 70 SBD, while the maxed out rare would have an expected win of 30 SBD. Therefore, the utility value of the maxed legendary card should be 70/30 the value of the maxed out common card. Considering that it takes 8 legendary cards to max out vs 379 common cards, this means that the utility value of a single legendary card should be 110x the value of the common card ((70/8)/(30/379)) = 110.

Clearly, this will be a very difficult equation as it must not necessarily be the maxed out card which brings the highest expected profit compared to its costs. I am sure that this is going to be great fund and opportunity for analytical players.

What we can say pretty sure already today is the following:

• A maxed out legendary card will be better than a maxed out epic card
• A maxed out epic is better than a maxed out rare
• A maxed out rate is better than a maxed out common

While wo do not know how much better the cards will be relative to each other, I think it gives a certain lower level of valuation, assuming that the cards would all be on the same level:

As it takes 379 cards to max out a common, 86 for a rare, 32 for an epic and 8 for a legendary, the minimum relationship should be the following:

• A rare card should have a utility value of at least 4.4x (379 / 86) the rare cards. Again, this is the minimum, the real value will be above this level. Given that common cards are priced at 5 cents at the moment and rares at 17 cents at the moment, I would conclude that rares seem to be undervalued relative to the commons.

• An epic card should have a utility value of at least 2.7x the value of a rare card and 11.8x a common card. Given that epics are currently priced 0.6 cents vs. 0.17 cents for the rares, it seems as if the relationship between epics and rares is at currently 3.5x in an area where it is difficult to say if they are over or undervalued.

• A legendary card should have a utility value of at least 4x the value of an epic. Given the fact that the value of the legendaries are currently priced about 16x the value of an epic, it seems as if the legendaries could be significantly overvalued from a utility perspective.

Conclusion

While it is too early to come to a final conclusion, I think there is some clear conclusion we can draw at this moment:

1. If you want to speculate on a significant increase in value, your place is to look for the Gold Foil cards, preferrably the Legendary cards 8if you can afford them) or the epics. As a word of caution, this is clearly the riskiest call. Also, I personally wold make sure not to play with these cards or combine them as it could impact their collector value.

2. If you are a player and want to boost up your deck with the best value for money, rares are in my view the cards to buy.

Wish you all the best & good luck investing and playing,

Tim

Thank you @calumam for creating these awesome dividers