Posted Tue, May 11, 2010 by Space Junkie
A market stampede is what happens when a few members of the general EVE Online populace get an idea, and begin to buy or sell a commodity conspicuously enough for other players to notice and follow their lead. Just like stock markets in real life, stampedes can cause wild price fluctuations and generally screw with a market. This article is a discussion of how to make market stampedes work for you, rather than against you.
Explaining A Stampede
Stampedes can affect not only a particular commodity, but dozens of secondary markets.
After not so long, a good market stampede will become a self-reinforcing trend that forces a price to hit nearly rock-bottom, or buoys the price of an item to higher than anybody is willing to pay.
In the case of a crash, the price of the item will eventually become so low that nobody stuck with stock is willing to sell, and they would rather hold onto their stocks than dump them. Or perhaps opportunists will begin buying up stocks at the newly tanked prices in the hopes of a price rebound. Even if the price of an item is not expected to rebound over the long term, it will often see a small increase in price at the tail end of its plummet. This miniature price spike that takes place on the tail of end of a crash is called a "dead cat bounce" in financial circles, because even a dead cat will bounce if you drop it from high enough. In EVE, this bounce is mostly due to investors trying to buy stockpiles while the price is low but doesn't seem to be going down any further, even if the price will never recover to its previous heights. It also can be due to players dumping their stockpiles in a panic, forcing the price lower than where it will eventually reach equilibrium.
In the case of a rising price, eventually the price will become so high that the end users of the product (as opposed to marketeer players that view the item as an investment) will look for alternatives to that product. If the item is a ship, those players will fly other ships until the price declines to more acceptable levels. If it's an item that is used for industrial purposes, then whatever uses it will stop being produced until it can be sold for elevated levels that reflect the price of the new ingredient. Eventually, the people that have been stockpiling will become nervous that the item price will correct itself before they can take advantage of it, and they will begin selling and competing for the lowest price.
Where And When Do Stampedes Occur?
Stampedes are most common in Jita, where thousands of players make their ISK purely via price manipulation and market speculation. From Jita, the price changes permeate the rest of the game. Many, many prices throughout EVE Online are based purely on checking what the Jita price is and then adding an arbitrary markup. When the Jita price of an item changes, the change permeates throughout the entire game.
The vast majority of supply and demand for practically any item in EVE Online is located in Jita. People fly there to buy their goods even if they are cheaper at another location, because they are willing to pay extra if it means that they need to make less stops. This unique important of Jita can work and against market players. If you want to sell an unusually large amount of a single item that is not especially resilient to price crashes, it can sometimes be better to sell it in the many smaller market hubs around high-sec, like Amarr, Rens, and so forth, and then sell in Jita last. Since all of those other market hubs set their watches according to Jita, rather than vice versa, it makes bulk sell-offs less likely to lower the price of that item throughout the game.
This Jita-centricism can also be used to increase the effect of your economic manipulation. If you want an item to crash in price, or want to exacerbate an already crashing price, doing it in Jita will be more effective than anywhere else. The exceptions to this are the markets located at the primary sources of a particular good. Messing with that market will tend to have a more exaggerated effect than in Jita.
In short, anything that you do in Jita will be writ large upon the cosmos, and anything that you do elsewhere will have less import unless you are screwing around with the supply of an item.
Market stampedes are often deliberately provoked. The more limited the amount of a commodity on the market, the move vulnerable it is to a player buying out the market and re-listing the goods at five times the price. The larger the supply of an item on the market, and the larger the volume traded each day, the less likely it is that a market stampede will occur, deliberately or otherwise.
For example, so much Tritanium is traded in Jita that making a deliberate change to that price is all but impossible.
Profiting From Stampedes #1: Game Changes
The easiest way to make ISK from a market stampede is to keep abreast of new developments in the game, and to react to them before most players have a chance. Every time a game mechanic change is announced by CCP, it provokes a market stampede. Some players even have an automatic alert sound every time a developer blog is posted! The sooner you gain access to reliable information about a game change, the more likely it is that you will be able to profit from it.
In a purely hypothetical example, let's say that a CCP game developer credibly announced that veldspar would quadruple in price. You would want to buy as much veldspar off the market at its present, cheaper price as possible, and wish you had ISK for more. Only there wouldn't be any veldspar available at an acceptable price unless you were one of the first few people to gain access to that information. People would start buying cheap veldspar right away, and eventually someone wealthy enough would come along and buy all of it off the market. So keep abreast of changes to the game, and try to identify and react to new developments as early as possible.