🎮 Crypto-Strike

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So, Valve just crashed parts of the Counter-Strike 2 skin market.

Don’t say it. Don’t say it. Don’t say it. Don’t say it.

Crypto fixes this!

🪖 Rarity blues

The market for Valve game skins, particularly for Counter-Strike and DOTA digital assets, is not unlike crypto. 

It’s genuinely huge, but liquidity is fragmented, with many marketplaces operating in far-off countries with lax regulations. This can make prices unpredictable and weird depending on where you trade.

Buff163 is easily the largest and deepest, hailing from China, where skins and lootboxes are a big deal. The total market cap of CS2 items on Buff163 reached a new all-time high only yesterday — $6.3 billion — according to a portal which tracks the ecosystem.

Today, it’s down more than 15%, to about $5.3 billion, so around $1 billion in notional value wiped due to a single click from Valve. Which doesn’t sound like much, but that’s about the size of the entire CS2 skins market as it was during the second half of 2023, and I don’t want to imagine what the timeline would be like if the total crypto market cap tanked 15% overnight.

Valve had released an update that gave users the ability to trade up five basic Covert skins for knives and gloves from the StatTrak collection, which (as the name suggests) allows players to track their in-game kills made when using the item.

Most skin marketplaces are slow and even unresponsive right now due to the traffic (Buff.163 is giving me a message: “The system is busy, please try again later.”) But at least on the native Steam Marketplace (which is less active than Buff.163), StatTrak Bayonets, for example, went for between $500 and $700 before the patch. Two have been sold this morning for under $260 — a 50-60% collapse.

So, the skins market would be familiar to anyone who pays attention to NFT prices (the total NFT market cap is a touch under $4.9 billion right now, trailing CS2 skins by about $400,000).

Like NFTs, a lot of the market cap of CS2 skins is made up of wildly expensive items that barely trade at all, but are still valued at their most recent sale price. Which does undermine the $5.3 billion market cap statistic somewhat.

But gloves and knives, alongside lootboxes, are among the most traded category of skins, due to their rarity. 

And that’s what Valve has messed with here, the rarity of certain items, particularly some of the most liquid ones, which apparently make up about a third of the total market cap. You previously either had to buy them or be lucky enough to unlock a lootbox containing them, but now you can trade up to them with more common items. 

Meanwhile, the price of the common items has shot up as users seek to take advantage of the arbitrage opportunities.

And so the question is begged: Would the user experience be better if all CS2 skins were NFTs? 

OK, maybe crypto wouldn’t fix this…

Setting aside the non-financial benefits, like the actual ownership of digital assets (the real game changer), perhaps the market would be more stable had the StatTrak collection been hard-capped with immutable smart contract code. 

Corporate devil’s advocate would say that doing so wouldn’t leave any room to add new skins once that cap has been hit.

Valve is deep in the business of always giving gamers new reasons to unlock boxes for $2.49 a pop (the company is estimated to make upwards of $1 billion in annualized revenue from the lootboxes alone). Does Valve really need to make a new NFT smart contract every time it wants to add new neon lights to a bayonet?

For sure, there are trivial ways around that particular concern. And after witnessing how many marketplaces are struggling to handle traffic right now, maybe we are headed for a world where Valve sees the value of tokenizing its in-game items, or a skins-only DEX. Even if it’s for no other reason than better uptime for traders. 

Sadly, I just wouldn’t get my hopes up.

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