Vouchers Will Probably Remain Under-Pegged

Let's have a look at Vouchers!

In this post I want to examine Vouchers in more detail as I and probably many others have wondered whether they will be able to reach and maintain their intended peg at $3. The splinterlands team has taken a unique approach with their economy by pegging their assets (such as cards etc.) to a fixed dollar value. They argue that this will help stabilize their DEC token. It's a great idea, and currently we are still in the experimental phase with no clear time schedule for when this peg could be reached and we know even less if it can be maintained.

Vouchers are supposed to be worth $3 - as players can get a $3 discount for buying packs. However, we also know that this peg is not being maintained at all. Currently Vouchers are traded for about 0.8 Hive which means that they are worth only about 40 cents! So they are traded 7 times below their intended value. In this post I want to analyze the vouchers economy in closer detail to see if the $3 peg can be reached anytime soon.

TA

Well, there isn't so much of a TA to speak, as the only chart I could find is from Hive-Engine and this only goes back 3 months. But I still remember the chart a bit from several months ago 😅 When Chaos Legion was released Vouchers went all the way up to 4 Hive and came down again to about 0.7. Since then we saw an increase to 1.2 in July as well as the anticipated increase with Riftwatchers. However, I think most were surprised that it peaked at 1.8 Hive. In fact, I bought at these levels thinking that Vouchers would go well above 2 or even 3 Hive. Again, one reason is their intended value at $3 which would be an equivalent of about 6 Hive!

Since then price came crashing down. So I wondered: why are Vouchers so undervalued? We can see in the depth chart a slightly different picture (at least from 2 days ago). We can see that very few are willing to sell their Vouchers below 1 or even 2 Hive. In fact, there are onyl 2.5k Vouchers for sale under 1 Hive. This is basically nothing and means that price could very quickly increase to at least 1 Hive again.

But why the low value? For answering this question we have to look at the distribution and sinks that exist for Vouchers.

Inflation too high/Sinks too few?

Let's look at some numers. Although this is only a very rough estimate! So keep that in mind.

Voucher distribution started in January with 20k/day This means that we had 600,000 Vouchers distributed a month. In September this doubled with the distribution of rewards for the validator nodes and another 20k/day were added. So this adds another 1,200,000 a month. All in all this gives us about ~7 million Vouchers that have so far been distributed.

There are many sinks for Vouchers currently as well. But there is a caveat which I'll show in a second. I will be assuming here the best case scenario, meaning that people always bought their assets with Vouchers to maximize their value which obviously has not always occurred; but it seems reasonable to assume that the numbers will be rather higher than lower. If all assets are sold the sinks will be as follows:

-Chaos Legion (Bonus packs): probably under 1 million
-Tower Defense game: 2 million
-Riftwatchers: 3 million
-Licenses: 60,000*500= 30 million

This leaves a maximum amount for sinks at about ~36 million Vouchers! But obviously the assets are not sold out. In fact, most of them are not even close. So far in October we have about this many Vouchers burned:

Chaos Legion: 600k >>>66% completed
Tower Defense: 260k >>>13% completed
Riftwatchers: 700k >>>23% completed
Licenses: 2.5 million >>>8% completed

Which means that the actual number for the maximum burns it about ~4.1 million. This leaves about 3 million vouchers currently in circulation (7 mil - 3 mil). So the first clue is that there are currently many more Vouchers in circulation than have been burned. In other words, the supply is much bigger than the demand.

Demand is Skewed/Low

One of the things the Splinterlands team might not have thought of is that the demand for Vouchers is very skewed: the people who want to have Vouchers for Splinterlands assets will very likely have SPS staked and therefore receive most of the Vouchers they need for purchases. This means that the demand on the market for Vouchers is much less than probably anticipated. I think this was shown when Voucher price crashed after the Riftwatchers sale. This was different for Chaos Legion as back then there were simply much less Vouchers in existence.

We can also see that the sale of the assets is now quite low. This could have several reasons, and probably will reverse once the price of Hive/cryptos goes up again as more people will then be able to buy more assets again.

Conclusions

Keep in mind that the biggest sink by far is the sale for the licenses of the validator nodes. But the sell out could still take years with the cost of purchase continually increasing as more of them sell. All of this means that while the sinks are there, the actual sinks at this moment are much lower than the distribution.

Obviously, this dynamic depends on player buying behavior: if more assets were being bought, Vouchers would become very quickly very scare and therefore increase in price. But it seems that many have already made their intended purchases and/or are waiting for market conditions to change and are therefore delaying their purchases.

All of this probably means that Vouchers will remain under-pegged for quite some time. As every month 1.2 million Vouchers are added and the assets are not being bought as quickly (and also no major new sinks for Vouchers being added any time soon), there is simply no reason for the price of Vouchers to spike in the near future.

As a general reminder: Please keep in mind that none of this is official investment advice! Crypto trading entails a great deal of risk; never spend money that you can't afford to lose!

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