Magic: The Gathering contains a primary and secondary market. New products sold by Wizards of the Coast through a distribution network fall in the primary market. The secondary market consists of buying and selling individual trading cards opened from sealed products. It also contains selling sealed products sold outside of distribution networks like out of print booster boxes. The secondary market of MTG is an unregulated space where buyers and sellers exchange goods. Market behaviors found in regulated markets, such as the Nasdaq stock market, can also exist in MTG’s secondary market. One such economic event that can occur in both markets is known as a market bubble. Investopedia defines a bubble as “an economic cycle characterized by rapid escalation of asset prices followed by contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior.” A recent article by Elvis Picardo highlights the five largest asset bubbles in history. The dotcom bubble of the 1990s occurred in the Nasdaq market. One of the most famous bubbles was Tulipmania. This particular bubble occurred during the 1630s in Holland. While the dotcom bubble and Tulipmania are well documented, market bubbles in MTG’s history are not as clear. How is a bubble identified in a market containing trading cards? This article explores some possible occurrences of bubbles in the secondary market. Individual Card Bubbles In MTG, buyouts of individual cards could lead to a price bubble. This article on buyouts in MTG lists a number of examples. Specifically, the price history of Hexdrinker shows a brief period of rapid escalation in July of 2019 followed by a correction within 90 days. Another card that potentially went through a price bubble is Argivian Archaeologist. This card from the Antiquities set was almost $70 in January, 2018. It saw a price increase that hovered between $120 and $140 by the summer of 2018. Unfortunately, the price fell to about $60 by the end of 2019. Other cards with similar price movements include Gaea's Cradle, Tolarian Academy, Candelabra of Tawnos, Ali From Cairo, and Drop of Honey. All of these cards are featured on MTG's reserved list. Over the course of 2018, there was heightened interest in purchasing cards on MTG’s reserved list. It is possible that reserved list cards experienced a market bubble that began in 2018. MTG Set Bubbles Many valuable cards on the reserved list are from MTG’s earliest sets. One such set is Legends, which released in 1994. The price for Legends increased 65% in early 2018 from $9,370 to $15,476. During 2019, the set’s price fell about 22% to around $12,000. By January 31st, 2019, the set had fallen further in value to $9,666. Antiquities, another set from 1994, dramatically increased 90% from $2,415 to $4,586 in 2018. The price declined about 12% and stabilized around $4,000 during 2019. Antiquities pricing fell further by 17% between October 2019 and January 2020. Similar price patterns can be seen for the Arabian Nights set as well. Market bubbles can occur over a short or lengthy period of time. It is hard to predict when a bubble may happen and for how long. Buyouts are also hard to see coming. One option to avoid losing money on a potential bubble is not buying cards after they spike in price. While some cards stabilize at a price above prebuyout levels, this is not guaranteed. Nevertheless, a profit can be made by selling cards at an elevated price. Anyone who owns the cards prior to a price spike can potentially make money. However, there is likely a limited amount of time to make a profit.
*The information in this article is of my own knowledge and opinion. It is meant for informational purposes only. I am not a registered financial professional or trying to act as one.*
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Magic: The Gathering is a trading card game that began in 1993. The releases of Alpha, Beta, and Unlimited (ABU) card sets created the foundations for a game that has lasted over 25 years. Many cards in these first few sets are sought after by collectors and players. One MTG card has sold for over $100,000. Individuals do not just buy cards to collect and play, they also purchase cards as an investment vehicle. Other alternative investments that people participate in are cars, artwork, and Bitcoin. The rising price of Bitcoin in 2017 to almost $20,000 captured the world’s attention. Early investors reaped huge returns upon selling near Bitcoin’s high. There were stories of people that spent their new wealth from Bitcoin on collectibles like MTG. In particular, Reddit users in the r/mtgfinance subreddit shared information on buying and selling Bitcoin for MTG cards. As information spread on Bitcoin being used to buy MTG cards, it was perceived that prices for MTG’s most valuable cards were affected by cryptocurrency. In order to better understand the magnitude Bitcoin had on the price of MTG’s first three sets, I ran a regression analysis. For those unfamiliar with regression, you can find some basic information here. I recommend watching the video in the link for a better understanding of regression output. This analysis attempts to comprehend the relationship between Bitcoin and ABU from July 2017 to March 2019. I used the Bitcoin USD (BTCUSD) for historical Bitcoin prices. The S&P 500 was added to see if a relationship existed between ABU as well. I pulled pricing history from Yahoo Finance and MTGGoldfish. Data used in this analysis can be found here. The first two worksheets in the data file contain historical data. The remaining worksheets contain regressions. Establishing the Null Hypothesis In this analysis, I attempt to find statistically significant relationships between Bitcoin, S&P 500, and ABU. This analysis uses the ANOVA method to test significance. The null hypothesis for this analysis is that no statistically significant relationship exists between variables. The Fvalue must be larger than the Significance F (also the Pvalue) to reject the null hypothesis. In addition, I used an alpha level (significance level) of 0.05. If the Pvalue is less than or equal to 0.05 (or 95% confidence), the null hypothesis can be rejected. The Fvalue and Pvalue must pass each hypothesis test to fully reject the null hypothesis. To explain variability of the data, I am looking for an Rsquared value close to 100. In addition, the Pearson correlation coefficient was calculated at the top of each linear regression worksheet. In the linear regressions analyzed, the Pearson correlation coefficient matches the value of Multiple R. I tried to avoid overfitting by using 33 observations. Analyzing Bitcoin on S&P 500 Before diving into MTG sets, I wanted to analyze the potential relationship between Bitcoin and the S&P 500. Bitcoin historical data includes the time period it hit peak pricing at the end of 2017. The data shows large price fluctuations for Bitcoin over time. This price movement is much more erratic than the S&P 500. The image above includes a basic comparison of the historical price curves. Regression results for Bitcoin on the S&P 500 display an R Square of 0.165 and a Multiple R of 0.405. The regression is saying that 16.5% of the Bitcoin variability can be explained by the S&P 500. The Fvalue of 6.12 is larger than Significance F of 0.019. Finally, the Pvalue is less than 0.05 at 0.019. Since the Fvalue and Pvalue passed the significance level tests, the null hypothesis can be rejected. Alpha, Beta, and Unlimited The above graph illustrates price trends over time for ABU. Visually, Alpha and Beta follow similar price movement. A regression analysis of Alpha on Beta is available in the data file. The results showed statistical significance between Alpha and Beta. Even though Unlimited has a different value level than Alpha and Beta, it does have a similar price curve. The regression analyses for Unlimited on Alpha and Unlimited on Beta also showed statistical significance.
Alpha Analysis The regression for Alpha on Bitcoin produced interesting results. When looking at the Bitcoin related regression, the Fvalue is larger than Significance F. Unfortunately, the Pvalue of 0.55 is not less than or equal to 0.05. Note also that the R Square value is only 0.011. The null hypothesis cannot be rejected for the Alpha on Bitcoin regression. When looking at the regression for Alpha on S&P 500, the null hypothesis can be rejected. The Fvalue of 28.90 is larger than Significance F. The Pvalue is lower than 0.05. In addition, R Square is 0.482. Almost half of the variance can be explained. Beta Analysis The Beta on Bitcoin regression produced similar results to Alpha on Bitcoin. When looking at the Bitcoin related regression, the Fvalue is slightly larger than Significance F. The Pvalue of 0.42 is not less than or equal to 0.05. In addition, the R Square value is only 0.021. The null hypothesis cannot be rejected for the Alpha on Bitcoin regression. For the regression of Beta on S&P 500, the null hypothesis can be rejected. The Fvalue of 51.25 is larger than Significance F. The Pvalue is lower than 0.05 and the R Square is 0.623. Over half of the variance can be explained. Unlimited Analysis The results of Unlimited on Bitcoin cannot reject the null hypothesis. While the Fvalue for Alpha and Beta on Bitcoin was higher than Significance F, it was lower for Unlimited. The Pvalue of 0.657 is not less than or equal to 0.05. Surprisingly, the R Square value was under 0.01 at 0.006. Regarding the regression of Unlimited on S&P 500, the null hypothesis can be rejected. The Fvalue of 53.18 is larger than Significance F. The Pvalue is lower than 0.05 and the R Square is 0.632. Over half of the variance can be explained. Summation In all three regressions for ABU on Bitcoin, the null hypothesis cannot be rejected. This means that the results showed no significant relationships between ABU and Bitcoin. However, the null hypothesis can be rejected for all regressions regarding ABU and S&P 500. The highest statistical significance shown was Unlimited on S&P 500 followed by Beta on S&P 500. Multiple regression analyses for Bitcoin on ABU and S&P 500 on ABU are available in the data file. Their results were comparable to the single variable regressions. What the analyses show is that Bitcoin may not have a strong relationship with ABU prices. Additionally, the S&P 500 is statistically significant with ABU sets. The results of these analyses do not disprove that Bitcoin affects MTG card prices for ABU. It is important to remember that correlation does not imply causation. Unfortunately, these models suffer from a few issues regarding regression data. The r/mtgfinance subreddit community shared feedback with issues regarding autocorrelation, time series issues, and large residuals. In addition, the values could be standardized with zscoring. One possible solution is limiting the time frame the model captures by using values on a daily or weekly basis rather than monthly. The anecdotal evidence points to people buying ABU cards with Bitcoin near Bitcoin's peak price. It was suggested measure data between late 2017 and early 2018. While the data has flaws, the idea of measuring Bitcoin and ABU pricing is worth exploring further (Updated March 30th, 2020). *The information in this article is of my own knowledge and opinion. It is meant for informational purposes only. I am not a registered financial professional or trying to act as one.* Probabilities of Pulling Foil Premium Cards From Standard Set Booster Packs in Magic: The Gathering2/28/2020 In the Magic: The Gathering trading card game, Urza's Legacy was the first set players could receive foil premium cards from booster packs. Foil versions of different card rarities were available in the set. Over time, the introduction of mythic cards changed rarities available in booster packs. The rate of pulling a foil card out of a booster pack has changed over time as well. In 2019, the pull rate of foil cards increased with the introduction of Core Set 2020. This article will look at the different pull rates of foil cards before and after the release of Core Set 2020. Calculations and information related to this article can be found here. Probabilities of Pulling Foil Premium Cards Prior to Core Set 2020 When opening booster packs, foil cards had given odds of 1 in 67 cards. Each booster box contained at least one foil rare (or mythic) beside foil common and uncommon cards. The estimated probability of a foil rare was 1 in 540 cards or 1 in 36 booster packs. The general consensus was that a case of booster boxes contained one foil mythic. The probability of pulling one foil mythic in six booster boxes is 1 in 3,240 cards or 1 in 216 booster packs. In summation, an average booster box contained 8 foil cards with one being a foil rare or mythic. Probabilities of Pulling Foil Premium Cards in Core Set 2020 The given odds of pulling a foil card in Core 2020 is 1 in 45 cards or 1 in 3 booster packs. If the ratio between pulling a foil nonrare and foil rare is maintained from previous sets, then the probability of pulling a foil rare becomes 1 in 363 cards or 1 in 24 booster packs. This means that a booster box may contain 2 foil rares. Using the same previous ratio of a foil rare to a foil mythic, the estimated probability of pulling a foil mythic is 1 in 2,160 cards or 1 in 144 packs. Essentially, 1 in 4 booster boxes may contain a foil mythic. When comparing the probabilities before and after the release of Core 2020, there is a 50% increase in the opportunity to pull a foil rare or mythic. Probabilities of Pulling Specific Foil Rare and Mythic Premium Cards in Core 2020 There are 53 rare and 15 mythic cards in Core 2020. This information, along with the calculated foil probabilities for Core 2020, can be used to find probabilities for specific foil cards. The result of multiplying (1/53) by (1/24) is 0.08% or 1 in 1,272 booster packs. This is the estimated probability of pulling a specific foil rare. Multiplying (1/15) by (1/144) equals 0.05% or 1 in 2,160 booster packs. This is the estimated probability to pull a specific foil mythic from a booster pack. On average, it would require opening 35.33 booster boxes to find a specific foil rare and 60 booster boxes to find a specific foil mythic. *The information in this article is of my own knowledge and opinion. It is meant for informational purposes only. I am not a registered financial professional or trying to act as one.* In the Magic: The Gathering card game, trading cards originate from sealed product such as booster boxes and preconstructed decks for Commander. Once trading cards are obtained from various sealed product, they can be traded and sold among players (and businesses). A secondary market exists in the Magic: The Gathering card game where players buy and sell individual trading cards. The value for an individual card is determined by demand, supply, rarity, tournament results, and other factors. The market prices for single cards can fluctuate daily. Online vendors and selling platforms such as TCGPlayer, Card Kingdom, Star City Games, and Ebay can have a predominate impact on a card's supply availability. In addition, a number of popular MTG related websites use pricing from TCGPlayer to determine a card's market value. A potential result of this relationship is when the market price rises for a single card on TCGPlayer, the price may also increase on other websites. Vendors may react to a price increase across multiple websites by raising their selling prices as well. The interconnectivity of MTG card prices, along with supply availability, enables the possibility of large price swings. What is a Buyout? A buyout is when all available (on the Internet) copies of an individual card are bought by one or multiple individuals in a short period of time. Typically, this action is taken to increase the price of a particular card by limiting the supply availability. There are multiple reasons and scenarios a buyout could occur. One example of a potential buyout is when a speculator notices the price of an individual card is undervalued relative to its demand. The speculator could buyout all copies of a specific card and then resell them after the price increases. Example of a Previous Buyout: Hexdrinker The Modern Horizons MTG set was released on June 14th, 2019. This set contains a mythic card named Hexdrinker. Upon release of MH, Hexdrinker's price was around $10.00 in paper form. According to MTGGoldfish, Hexdrinker increased in price to $25.00 on July 11th, 2019. The result of this rapid price movement was due to individuals buying all available copies of the card. The Hexdrinker price graph on MTGGoldfish shows when the buyout occurred. One week later, the price of Hexdrinker dropped to around $21.00. By August 2019, the price had fallen further to $16.00. The constant decline in price following the buyout was likely due to the lack of demand for Hexdrinker at a higher price point. However, Hexdrinker did not return to its prebuyout price until October 2019. There was a period where individuals who purchased or obtain copies prior to the buyout could sell them for a profit. Analyzing a Recent Buyout Attempt: ZoZu, The Punisher ZoZu, The Punisher is a MTG card that saw its first printing in the Champions of Kamigawa set. A reprint of the card is included in the Duel Decks: Mind vs. Might product from Spring 2017. While not a popular card, ZoZu sees fringe play in Commander and various constructed formats. On December 22nd, 2019, I noticed supply levels were low for ZoZu across both printings. The TCGPlayer market price was $3.27 for the Duel Decks version with 14 copies available. The lowest price for a near mint copy on TCGPlayer was $3.46 plus shipping. The pricing graph on MTGGoldfish showed that the Duel Decks version had started to increase in price after the release of Throne of Eldraine. In addition, the card had a negative spread on buylists. When a card on MTGGoldfish has a negative spread, it is usually a good indicator for an arbitrage opportunity. I suspected this card was targeted for a buyout due to the low supply availability and erratic price movement. While checking for other Duel Decks copies on the Internet, I found 18 for sale on Amazon at $1.35 each ($1.40 after shipping). I immediately purchased all available copies and received 17 out of 18. The day after I purchased multiple Duel Decks copies of ZoZu on Amazon.com, the price on MTGGoldfish rose $0.07 to $3.28. I tried to sell some of my copies on Ebay as a set of four. The price I listed was $11.49 including free shipping. I was unable to sell them as a set, even after lowering my listed price to $11.00. Ultimately, I buylisted the copies for cash at $1.75 each. My net profit from the transaction was $5.95 for a 25% gain. The price for ZoZu on MTGGoldfish had risen to $4.00 by the time I sold out. While my purchase of the card may have driven the price higher, it is doubtful I was the only person buying copies. The supply availability still remained low at the end of January 2020. I believe one of the reasons why I was unable to sell sets of ZoZu on Ebay is because players predominately use one copy in decks. Buylisting the 17 copies was likely my best exit strategy from the beginning. I could have sold individual copies for around $2.75, but shipping and selling fees made this decision less appealing. When individual cards are bought out, there is not always enough demand to maintain an elevated price. When this happens, the price will continue falling over a period of time until it stabilizes. In addition, players may list their personal copies for sale to take advantage of the increased market price. These additional copies add new supply to the market. As an example, I sold a Jace, Vryn's Prodigy from Magic Origins for $36.00 after the Pioneer format was announced in October, 2019. Jace, Vyrn's Prodigy is currently priced at $28.49 on MTGGoldfish as of January 30th, 2020. The window of opportunity between a price spike and a subsequent decline can vary by the individual card buyout. There is risk in missing the window of opportunity to rake in a profit. In closing, here are a few examples of individual card buyouts and their price curves over time from MTGGoldfish. *The information in this article is of my own knowledge and opinion. It is meant for informational purposes only. I am not a registered financial professional or trying to act as one.* 
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