L$ Continues Massive Rally!

Yes chickadees, the L$ is in full rally mode at the present time - a stark break from the so-called impending L$ crisis and meltdown of just a few weeks ago.

Pouring over statistics and market data from LL's currency exchange (LindeX) one can see that tht L$ has rebounded from lows of USD $3.13 per L$1,000 to hover very near the $4.00 USD mark.

A remarkable recovery!

So what has led to this recovery? Is it the fact that L$s are now insanely easy to purchase through LL itself or were we merely in a negative supply/demand situation earlier - from which we've recovered?

Time will tell, but meanwhile content creators continue to celebrate.

When just one month ago...

You remember the control action that LL announced to reduce the money supply ? The abolition of the ratings-related stipend supplement ? An action taken precisely to achieve the effect we now begin to see ?

It's possible that it is beginning to kick in.
By my estimate it should be expected about now........

I wouldn't be surprised to see us get well above $4.
I see a block of resistance in the sell orders at 251/$, but nothing much either side. Break below 251, and we're out in open territory.

I'm not selling the little I have below $4.1, and I think we'll get there soon.

LL have the power. $4 is their declared target, and I believe them. The money supply is in their hands, however much we may rant on to each other.

That and the ease of access to new buyers.

Buy 'em while you can. L$ is going over $5.00 USD / L$1,000 before the year is up.

Yes, Jillian. That too. Also LL's doing.
The illusion that LL are not in charge is just that - an illusion. They are in no hurry, so in the shorterm we can imagine them powerless, distracted, or uninterested - but it's a mistake.

I think there are five things kicking in:

1. Loss of rating stipend decreased supply.
2. Lindex brought more new demand for $L than it did new supply of $L. (This is most likely a temporary benefit. While it may be true that there were suddenly a large amount of new buyers, those $L bought are now being spent. They will soon re-enter the market and possibly cause a short term drop in price at some point.)
3. 2 cent teirs are gone causing less benefit to those that try to encourage price change.
4. Some sort of population explosion must be occuring. Two other land sellers I've talked to and myself have all had huge land sales last week.
5. Prices on in-world goods went up causing more demand for $L. I can't say for sure what happened with content, but I know land went up about $L1/meter2 in price.

There also seems to be less money listed for sale too. I wonder if maybe there are still people holding onto their money waiting for it to peak. The changes in the money supply, the huge increase of new users, and the more "trusted" LindeX has all helped push the market up. The underlying guestion still remains, what is the true value of the L$?

I don't understand your logic. You want me to keep embracing a fact that is no longer relevant? You must lose a lot of money in the stock market.

Quantitative exchange rate model -- overview
Quantitative exchange rate model -- overview of assumptions

That is the economic question for everything. The answer is whatever you can get people to pay for it. Right now the current value can be seen on the $L market. Trends can be looked at such as Ricky has pointed out to estimate where the future $L will go. Changes like what has occured in the last couple months can change the trends. And even without changes by Linden Labs, price trends can always change from the multitude of other influences to the price of things. For all we know, people have underestimated the value of the $L, and it will now start a steady trend up. Ricky could be right, and it will continue its trend down.

The stock market is living proof that prices do not always do what they would be expected to do by the best analysts. The value of something is not always rational. It tends to be pushed around by supply and demand and news about the thing being traded, but it is not always rational. Who knows where the $L will really go? My guess is no one knows.

I'm impressed with the strength of the $L, but only time will tell if it holds up. I don't think it can in the long run.

Ricky's analysis says, in effect, L$ cost US$2.88 per 1,000 to obtain, so that's what they oguht to sell for. While I would view 2.88 as more of a limit than a target, I tend to agree with the theory behind the analysis.

Buster

It had two points..

1: To show how far its come in such short a time, as lots of people were agreeing with your prediction

2: To show the panicing in that thread, though understandable, wasn't nessisary afterall..

So were we to see the L$ plumbet again, we should trust the Lindens in their judgement

And that I was right not to panic

Ah, ok. I thought you were encouraging people to retain their bearish sentiment on the L$, which would clearly be misplaced at this juncture.

If you're looking to make money, its time to go long on the L$.

After that plateau followed by the rise in price today, I'm really starting to wonder if the trend has reversed. A change like the rating bonus cut should have some effect on the overall trend. It would be amazing if such an action sends us into the opposite trend of $L getting more and more expensive. Only time will tell again, since I don't have the numbers I wish I had. I wonder if Linden Labs will give out a larger bonus to counter a raising $L if it starts to approach prices of L$200/US$1.00. I hope they plan to do something to level things out now that we are nearing L$250/US$1.00 instead of just letting it rise on past their mark.

I'm also going to say, and expect a beat up over the fact, that I would suspect there is very little day trading if any going on with Lindex.

My general feeling nearing the end of GOM was that there was only a handful of unique buyers and sellers, and the rest were day traders, which was slowly pushing down the value of the L$ with the trade volumes. And being in the top trading tier bracket, they could afford the spread

this is assuming that there are content creators who want to sell L$ but do not know about Lindex (doubtful), or that the broad group of residents who are doing the current purchasing of L$ have bought what they want to buy and have no need for further L$ (possible, but likely?), or that Second Life's growth rate is going to slow dramatically (it will probably fluctuate and may be going through a spike right now, but there will be more spikes down the road).

it is true that amongst the recycled L$ that will be coming back to Lindex shortly there will be a huge influx of new weekly stipend money, but as long as SL grows that remains manageable.

I offer a little anecdotal evidence.

I manufacture and sell scripted doors and windows. I talk to my customers. Many (most?) are relatively new residents who have bought property and are building houses. I get the impression these people are not kids who come to play tringo, build cars in the sandbox, or have sex (such as it is) in a dungeon. They have jobs and families, sometimes show up with their RL partners, and can afford a few extra dollars a month for a hobby.

My sales have increased remarkably since LindeX started.

Before LindeX, my customers would sometimes tell me they would be back as soon as they got their next L$500 stipend, (and they did come back). When I mentioned they could pick up some Linden at GOM, they would tell me they knew that, but it was too complicated, and/or they didn't have a paypal account and didn't want to open one.

A thousand Linden buys a lot of doors and windows. And tee shirts, animations, diningroom tables, houseplants, and other such things. It will keep you busy for a session or two. And I would guess, for many of my customers, the difference between spending $3 or $4 for a thousand Linden hardly matters.

I hypothesize that LindeX has opened up a source of in-game currency to a lot of new players who don't really care, within limits of course, how much it costs to pick up small amounts of currency (small = one or two thousand Lindens). For these players, demand for Lindens is nearly inelastic, hence the market now floats upwards with very little resistance, especially since SL has recruited a lot of new players.

L$ started to rise soon after Jaime made a bearish pronouncement on the L$. Now that she's bullish, is it an indication that the L$ is about to peak, and that it's time to sell? Are Jamie's posts a contrarian indicator?

Hee hee, doubtful... I'd been bearish on the L$ for a LONG time and had many posts to that effect.

This is the first post I'm officially bullish.. hence the L$ has a while to climb before I can be a contrarian indicator

Or perhaps you're excellent at observing the obvious.

The L$ is higher than it was! Everyone sell (or was it buy?)

LoL.. Obviously you have no trading skills whatsoever, bub.

Ever heard of the trend is your friend?

Its not just a catchy little saying. See you in the Pink Sheets.

Jamie, that's also not your original concept, so forgive me if I forget to be awed at your repetition of a phrase that has no bearing on the facts. Since you're educating me anyway, perhaps you can show me how it actually applies to Second Life's economy as you know it.

You do, of course, remember that LindeX has only been open a short while? Surely you also remember recent changes in land pricing. How about modifications to the rating system? Any of these sound familiar? Hmm? Or are we pretending these are market reactions rather than inherint economic modifications?

Follow that trend.

That is why I stated it as a temporary effect. If you suddenly have a large amount of new people buying the $L, then on the market you have new demand for the $L. It doesn't become new supply till the $L gets spent and put back into the system by those who want to sell. The reason I think this might be a benefit that lasts past a couple of days is confidence. People saw a sharp rise in the market, so they don't want to risk getting less than they could. The cycle of the $L back into the system should be balancing out the new buyers now that they have spent their $L, but the correction from this balance is unlikely to be instant.

I sold about $75K L 3 days ago on the SL monetary exchange. Its was a low trading day. I got like $1 for every $357L or just under $300 US. Not bad. But between SL and Paypal I got sucked out of about $35 in fees!!! Plus it took 3-4 days for my sale to hit my Paypal account. Think twice before you cash out. Hold a decent reserve for yourself. You'll have to pay again to buy it back.