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Wednesday, 21 October 2015

HoT countdown: Last minute investments

Hey guys and welcome back to my blog - sorry for the break in posts, I have been very busy recently. Heart of Thorns has crept up on us, or so it feels like! In just TWO DAYS we will be logging in to find a new patch giving us access to the jungle. It is crazy to think how long it has actually been since the original announcement - it was all the way back in January this year that the Living Story season 2 came to a close with that epic cliff-hanger of an ending leaving us suspecting more was to come. And we were not wrong; a lot more was coming and it was to be called Heart of Thorns, Guild Wars 2's first expansion. ArenaNet have done a fantastic job of spreading the news of the expansion over a lengthy period of time, giving us just enough to maintain hype whilst not exhausting the supply of fresh content to talk about. Collectively, Heart of Thorns is actually much bigger than it initially seems on paper. We are told we will be getting 4 new maps as an example, but those 4 maps are more like 10-12 maps realistically if you consider the 3 levels of each map and how big those maps actually are. If you think you may have missed something about HoT, you can check out WP's video which wraps up everything(important) about the expansion. However, I'm here to talk about something a bit different; the economy.

We are on the verge of a drastic shift to the economy of Guild Wars 2 and no market is safe. In this official blog post by ArenaNet's resident game economist John Smith, it is stated that "instability is coming... again". What does this mean? Well it is difficult to tell exactly which markets will take the biggest impact. However, looking over markets, especially crafting materials, we can see some obvious contenders that need more demand-side stimulation, or possibly just less sources of supply. So lets talk about which markets are the most likely to be affected:

Leather, Silk & Metal

It is no secret that leather is the most undervalued and oversupplied crafting resource in the game. Comparing leather to metal or cloth yields ridiculously huge differences value as a result of demand-side shock. What exactly am I talking about? The patch that introduced ascended armour also introduced a new, massively strong strain on cloth, particularly Silk and Linen, which in turn allowed their values to soar to insane new levels that hadn't been seen before. This of course is old news, and what back then we thought were very high prices, have now become the norm. In fact, Silk prices still continue to creep up slowly, and perhaps Heart of Thorns will apply something to combat that. John Smith said in a redditor's thread, that the main focus of the changes to the economy was the problem with scarcity. Without going into to much detail he was able to explain how that process could work, which may see returns from salvaging gear lowered or increased, to make a lasting affect on the supply of a particular crafting material. In focus, I believe the main targets of this change will be Cloth and Leather. While leather is undoubtedly oversupplied at the moment, it is difficult to say whether the issue really lies with supply. It is well known that leather is not used as a component for many end products except for it's standard uses like medium armor and perhaps the odd rune or sigil. Meanwhile metal, and particularly cloth, have extremely high demand from multiple additional sources. Cloth is used in all 3 ascended armour tiers, and does not have an open-world node, so farming it is difficult and not guaranteed. While metal is in a similar boat where demand is still very high but the node resources in the open world allow the supply to keep up somewhat.

Changing the Formula

So how exactly will the problem of leather and silk be fixed? I believe this will come about as a result of many small changes adding up to a larger impression. First off, I think it would make sense to lower the salvage rate of leather from medium armour gear and increase the salvage rate of cloth from light armour gear. This will directly impact the supply of both crafting materials and in the mid to long term, you will see the supply making an impact on the values of said crafting materials. Then there is the issue of demand. Whilst I believe the demand for cloth is ever-present with it being a main component of ascended armour crafting, I highly doubt ArenaNet will add many more cloth sinks into the game. I also believe that cloth is perhaps at a fairly stable place at the moment, and they may only wish to slightly increase the supply to just shift the price. However, the main consideration for demand changes would be leather. Leather has a serious lack of demand - it is in the same position(or worse) than cloth was pre-ascended armour patch. How will they fix this problem? Right now it is very difficult to say because unlike ascended armour, many of the new things being added with HoT do not offer the same 'limitless' demand. What I mean by this is, as long as ascended is the top tier gear, it will always be in demand. Meanwhile, things like new legendary weapons and even legendary armour? Not so much. These are usually one-time purchases(or crafts). They are not consistently demanded. However with that said, this is mainly dependent of course on the sheer levels of crafting materials required for those things. And they could simply try to place a leather sink in gen 2 legendary weapons by applying huge quantities of leather in their crafting build-ups - although I am not convinced.

The long term

Let's consider the long term for a moment, and consider a few last minute investments in case you did not invest yet. In my honest opinion, leather is the absolute risk-free potential investment. Why do I come to that conclusion? Leather simply has to be the main target of the economy shake up this time around. Let's take a look at Thick and Hardened leather a bit more closely. On October 12-13th, roughly 6 million units of Thick Leather Sections were purchased from the trading post leaving around 10 million still listed. This happened on the same date as John Smith's economy blog post. The 6 million disappearing leather sections are obviously being hoarded by eager speculators ahead of friday's big launch day. Meanwhile Hardened Leather Sections saw a similar shift, with around 1.1 million units missing on the 12th, with 3.9 million still listed. Again, it is no secret among the savvy playerbase that leather is very likely to have some big changes when Heart of Thorns go live. Yes we know that several million pieces of leather are sitting idle on many player account just waiting for launch day. However, even with all of this knowledge, I still believe that leather is the absolute must-do investment right now, with eyes on the mid-long term prospects. In the short term, leather markets will suffer from speculators remorse, where many amateur speculators will drop their supply early, being impatient in waiting for a return - when this happens, and it probably will, leather will drop (possibly very)low again. But assuming good supply and demand side measures are introduced, in the long term I could see leather like Thick and Hardened Sections reaching the 2 silver mark, possibly even more. In the event that leather is the new silk on patch day, you could be very rich indeed.