Counter-Strike Skin Economy

[Darkoth89]

This is going to be a different post compared to most other topics here in the Economics sections. If this doesn't belong here, feel free to remove it. I am talking about the economy of virtual skins/items for the game Counter-Strike: Global Offensive (CS:GO). I don't know if there's any interest about it here but imo it's nevertheless an interesting topic, especially its investment potential.

For those of you who don't know, CS:GO is a first-person shooter by Valve where you can customize your looks (weapons, gloves etc.) with different virtual items/skins. These are both tradeable between two players and can be sold on the Steam community market. It basically works like this: By playing the game you get a weapon case from time to time. These can be opened by spending money to gamble for a weapon skin. Stickers (and capsules, which contain stickers) however are directly purchased ingame and can then be applied to a weapon skin.

While the weapon skins itself aren't that interesting investment-wise, stickers, cases and (some) capsules definitely are. The reason for this is that stickers, cases and capsules get removed from circulation when opened or applied. Let me give a good example that shows that: Back in 2014 Valve introduced 2 sticker capsules for a limited time to celebrate the CS:GO tournament in Katowice. These were sold for around $ 0,85 ingame (don't know the exact numbers but I think it was 0,75 €) and are now worth $1800 - $2500. Some of the stickers from that capsules are now worth $10.000+! (According to this site: https://www.dexerto.com/csgo/top-20-most-expensive-csgo-stickers-in-history-1361385 There are hardly any up for sale). These are numbers usually only seen in crypto (and only very rarely!)

While this huge success of the Katowice 2014 capsules/stickers is mostly because the CS:GO playerbase was low back then and so the number of sold capsules was relatively low, the following tournaments with their individual stickers also would've been a decent investment. And I can imagine the stickers of the upcoming tournament in Rio to be also in high demand in a few years, depending on their looks and how many get sold during the time they are available. The profit margin however will be much lower.

Looking at cases, Valve releases a new one from time to time. This causes older cases to drop less frequently, eventually causing the supply to decrease when the number of opened cases exceeds the number of droped ones. So the prices for new cases usually drop to $0,03 - $0,05 on the Steam community market after their release but can go up $20+ when they are a rare drop (https://steamcommunity.com/market/listings/730/Operation%20Bravo%20Case).

The huge downside with this kind of investment is that you have to rely on the success of the game (CS:GO) and to rely on Valve not making some weird changes to the whole ecosystem. You also have to keep in mind that the prices shown on the Steam community market are not what you'll get when you actually want to cash-out. To get your money out of the Valve/Steam ecosystem you have to use third-party-sites. Prices on these cash-out sites are usually 20-30% lower that on the community market.

I think the examples I have given show pretty good that there is (there were?) good investment opportunities in the CS:GO economy. The reason I made this post is that it seems like there is currently a real hype going around with a lot of items being sold right now, Youtubers making investment videos etc. (Kinda reminds me of crypto 2017) So I was wondering what your thoughts are. Is it something completly new for you or do you also hold some CS:GO items already? Even though I play the game occasionally, I just recently realized the immense value these virtual items hold.

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[Barnabe]

I think the problem with this type of "investments" and trading opportunities is that they are open to the whole world. So everybody is competing with 3rd world countries for any type of profit. At the end, I don't doubt you can make a profit, but the margins will probably be very low and people would be better off flipping burgers.

[Darkoth89]

I think the problem with this type of "investments" and trading opportunities is that they are open to the whole world. So everybody is competing with 3rd world countries for any type of profit. At the end, I don't doubt you can make a profit, but the margins will probably be very low and people would be better off flipping burgers.

Well, some items are indeed cheaper in the community market when you pay with a weaker currency and don't have to use EUR or USD but can pay with INR or RUB, for example. This goes especially for cheaper cases. But otherwise I don't really see what you mean with competing with 3rd word countries. It's not the case that you can earn the items for your investment only by playing the game. There is only a limited number of case drops per account per week.

[Barnabe]

I think the problem with this type of "investments" and trading opportunities is that they are open to the whole world. So everybody is competing with 3rd world countries for any type of profit. At the end, I don't doubt you can make a profit, but the margins will probably be very low and people would be better off flipping burgers.

Well, some items are indeed cheaper in the community market when you pay with a weaker currency and don't have to use EUR or USD but can pay with INR or RUB, for example. This goes especially for cheaper cases. But otherwise I don't really see what you mean with competing with 3rd word countries. It's not the case that you can earn the items for your investment only by playing the game. There is only a limited number of case drops per account per week.

You earn them by playing the game, but their value will be fixed by offer and demand. Since a lot of people will try to play the system and only play to get the items there will be a lot of offer (1st and 3rd world players) for little demand (rich 1st world players/buyers). You can probably speculate and invest in some items and wait for them to increase in value, but farming objects or trading them hoping for a profit is in my opinion useless because like I said you are competing against people willing to work for 0.50$ an hour.

[jossiel]

I have played this game and still playing it whenever I've got time but I don't focus to its skin economy. But I'm aware of the marketplace that they have and some players I think is treating this seriously. They've been able to make their living through it and those items are not just in game items but true digital assets.

And you know what, since it's Valve, even their dota 2 community is also getting a huge market from time to time. The number of players are increasing and stable to hundreds of thousands and the items that become rare, they become not just an in game gold but a real hidden found gold in life.

[Darkoth89]

You earn them by playing the game, but their value will be fixed by offer and demand. Since a lot of people will try to play the system and only play to get the items there will be a lot of offer (1st and 3rd world players) for little demand (rich 1st world players/buyers). You can probably speculate and invest in some items and wait for them to increase in value, but farming objects or trading them hoping for a profit is in my opinion useless because like I said you are competing against people willing to work for 0.50$ an hour.

I know what you mean but that doesn't matter. Actually, you don't even have to actively play the game to get items. You can just go on an afk-server. But the amount of items you get per week is limited. You won't get rich just by the items you drop for yourself. And with prices of a few cents per case it won't make much sense for anyone to make hundreds of accounts, then to store the cases for (potentially) a couple of years, not knowing if all the effort was worth in the first place.

I have played this game and still playing it whenever I've got time but I don't focus to its skin economy. But I'm aware of the marketplace that they have and some players I think is treating this seriously. They've been able to make their living through it and those items are not just in game items but true digital assets.

And you know what, since it's Valve, even their dota 2 community is also getting a huge market from time to time. The number of players are increasing and stable to hundreds of thousands and the items that become rare, they become not just an in game gold but a real hidden found gold in life.

Yeah, I know Dota 2 also has a huge playerbase and an interesting market. But because I don't play Dota I even know less about its economy.

[Kakmakr]

The problem with this is that the stickers and capsules are only worth anything whilst the game are still being played. As soon as a new version of the game gets released or replaced by some super cool game, the price will plummet. We saw this happening with games like Starcraft I and also Broodwars etc.

Yes, the online games last a lot longer, because a loyal community are built around the game ....but as time goes by, new players stop playing it and the older players thrash newbies in the game as soon as they join.. and then they leave.

There are simply too many new games being brought to the market, so gamers are spoilt for choice. These skins/capsules/stickers should be ported to newer versions of the game and between different platforms for it to keep it's value.  

[jossiel]

I have played this game and still playing it whenever I've got time but I don't focus to its skin economy. But I'm aware of the marketplace that they have and some players I think is treating this seriously. They've been able to make their living through it and those items are not just in game items but true digital assets.

And you know what, since it's Valve, even their dota 2 community is also getting a huge market from time to time. The number of players are increasing and stable to hundreds of thousands and the items that become rare, they become not just an in game gold but a real hidden found gold in life.

Yeah, I know Dota 2 also has a huge playerbase and an interesting market. But because I don't play Dota I even know less about its economy.

Both communities have made a huge marketplace although I don't follow the community of CS:GO that much. The userbase is huge too.

The economy of dota 2 is just the same as CSGO's. There were items in the past that's been priced as cheap item yet overtime it has increased. I guess your total net worth in skins is huge.

[Darkoth89]

The problem with this is that the stickers and capsules are only worth anything whilst the game are still being played. As soon as a new version of the game gets released or replaced by some super cool game, the price will plummet. We saw this happening with games like Starcraft I and also Broodwars etc.

Yes, the online games last a lot longer, because a loyal community are built around the game ....but as time goes by, new players stop playing it and the older players thrash newbies in the game as soon as they join.. and then they leave.

There are simply too many new games being brought to the market, so gamers are spoilt for choice. These skins/capsules/stickers should be ported to newer versions of the game and between different platforms for it to keep it's value.  

That's exactly the main risk I see here, too. Riot Games, the developers behind League of Legends, just recently released their new shooter Valorant. Could be another strong competitor to Counter-Strike. But on the other hand I totally think that Valve will do everything possible to keep the system running as long as possible (maybe even transfer the skins to a successor if they ever release a newer CS version?). They earn millions from the 13% commission due on every sale in the community market.

[The Sceptical Chymist]

Some of the stickers from that capsules are now worth $10.000+!

That looks like a fad/bubble to me, like when Beanie Babies were going for crazy amounts of money.  The interest (and willingness to spend such outrageous sums of money on trivial things) isn't sustainable IMO.

Coincidentally I was just watching a few documentaries that dealt with these online gaming economies, and I do find it to be fascinating.  I'm not a gamer, so it boggles my mind that people would pay so much money for what amount to cosmetics (if I'm not mistaken).  My mind shouldn't be boggled, however.  I've seen people go crazy for weirder things than CS:GO skins in the course of my lifetime.  

The problem with this is that the stickers and capsules are only worth anything whilst the game are still being played. As soon as a new version of the game gets released or replaced by some super cool game, the price will plummet.

Yep, that's certainly something to beware of--and it's another reason why I don't think the high prices are sustainable.

[bits4books]

Everyone has long known that Valve specifically drops the economy of trading platforms every time a certain stable trend of demand/supply and prices is formed. So far, only knives that are consistently worth big money are successfully selling, but that's all. I think that at one point the economy of cs:go will come to the same thing as in dota2 - a complete collapse and hundreds of super-rare things for the price of a cheeseburger.

[suchmoon]

The problem with this is that the stickers and capsules are only worth anything whilst the game are still being played. As soon as a new version of the game gets released or replaced by some super cool game, the price will plummet. We saw this happening with games like Starcraft I and also Broodwars etc.

Not only that but every other risk associated with centralized/monopolized market applies here as well. Valve could go bankrupt, get hacked, shut their servers down for any number of reasons, become greedy and implement "property taxes" in addition to the commission. On the other hand, if they were truly benevolent they could find a way to "migrate" those items into a new version of the game if it comes to that. Regardless, investing into something that 100% depends on one company's whim sounds like an extremely bad idea. Obviously a lot of people don't think so.

[hatshepsut93]

That looks like a fad/bubble to me, like when Beanie Babies were going for crazy amounts of money.  The interest (and willingness to spend such outrageous sums of money on trivial things) isn't sustainable IMO.

This is kinda how stock investors view crypto - they think it rises too quick and too much, and they see volatility so they say it's not a real investment, no intrinsic value, a bubble, etc. Ofc crypto has actual utility, but pure speculation plays a much bigger role in price discovery right now.

[Scotslass]

That looks like a fad/bubble to me, like when Beanie Babies were going for crazy amounts of money.  The interest (and willingness to spend such outrageous sums of money on trivial things) isn't sustainable IMO.

This is kinda how stock investors view crypto - they think it rises too quick and too much, and they see volatility so they say it's not a real investment, no intrinsic value, a bubble, etc. Ofc crypto has actual utility, but pure speculation plays a much bigger role in price discovery right now.

Especially right now I mean last couple months while all skin traders and crypto traders are active and trying to make best out of this lockdown situation.
People do treat everything here not like an investment

[lumeire]

The problem with this is that the stickers and capsules are only worth anything whilst the game are still being played. As soon as a new version of the game gets released or replaced by some super cool game, the price will plummet. We saw this happening with games like Starcraft I and also Broodwars etc.

Yes, the online games last a lot longer, because a loyal community are built around the game ....but as time goes by, new players stop playing it and the older players thrash newbies in the game as soon as they join.. and then they leave.

There are simply too many new games being brought to the market, so gamers are spoilt for choice. These skins/capsules/stickers should be ported to newer versions of the game and between different platforms for it to keep it's value.  

That's exactly the main risk I see here, too. Riot Games, the developers behind League of Legends, just recently released their new shooter Valorant. Could be another strong competitor to Counter-Strike. But on the other hand I totally think that Valve will do everything possible to keep the system running as long as possible (maybe even transfer the skins to a successor if they ever release a newer CS version?). They earn millions from the 13% commission due on every sale in the community market.

Counter strike skins market is a pretty huge one and a rich source of income for the company and they will do everything to protect that. That's the reason why gaming companies are so competitive in releasing new updates and they always listen to the player feedback as they know that it's the players that should be served, if they do good service then their players will also support the company.
Also many a times there are skins that are very cheap in price but when a streamer or pro player starts using it in their game then the demand for that also increases so does the price.

[Darkoth89]

Coincidentally I was just watching a few documentaries that dealt with these online gaming economies, and I do find it to be fascinating.  I'm not a gamer, so it boggles my mind that people would pay so much money for what amount to cosmetics (if I'm not mistaken).  My mind shouldn't be boggled, however.  I've seen people go crazy for weirder things than CS:GO skins in the course of my lifetime.  

Yeah, wouldn't dream of spending so much money on an virtual item, either. But when you see that there were people paying thousands of dollars for other online items / collectibles, I stopped beeing surprised about what people spend their money for.

Not only that but every other risk associated with centralized/monopolized market applies here as well. Valve could go bankrupt, get hacked, shut their servers down for any number of reasons, become greedy and implement "property taxes" in addition to the commission. On the other hand, if they were truly benevolent they could find a way to "migrate" those items into a new version of the game if it comes to that. Regardless, investing into something that 100% depends on one company's whim sounds like an extremely bad idea. Obviously a lot of people don't think so.

I wouldn't see it as a classical kind of investment anyway. More like some kind of gambling money with high risk but a high potential reward. Fact is, that stickers from previous tournaments would've all left you with more than your initial investment. So I'll probably try my luck and spend a few hundred dollars on these limited stickers when the next tournament is around the corner. Then forget about the game again and be surprised when checking the prices later on. One way or the other ...

Right now I am just not sure if the current prices are caused by the popularity of the game itself and by players who buy skins to play with or if the price is driven by people who only see it as an investment.

[mu_enrico]

Be very careful about collectible stuff and account selling for video games since it will be a temporary thing and the Steam and the developers generally don't encourage such business.

If I'm not mistaken, you don't actually own items or accounts since you are only granted rights to use, so technically you don't own anything.

[suchmoon]

Right now I am just not sure if the current prices are caused by the popularity of the game itself and by players who buy skins to play with or if the price is driven by people who only see it as an investment.

I don't know enough about it so I'm talking out of my ass here, but if there is a way for someone to create scarcity by buying stuff up (i.e. limited supply, no limits on buying, etc) then I'm quite sure there are speculators driving the market or at least parts thereof.

[dothebeats]

I did hold a lot of valuable in-game items in several MMORPGs when I'm still in NA. Nowadays, I fancy CS:GO and Dota 2 item betting since it's really fun and takes your profit up there as there are tons of traders, buyers and sellers literally everywhere. I testify to the appreciation of value of some skins on the market, notoriously the Titan Holo Stickers, Emeralds, Rubies and Blue gems and the recently-released AWP | Gungnir which saw a massive boost in price over time. While there really is money to be made in hoarding valuable skins and selling them for later, I still think it really isn't a robust and bulletproof way to trade your way up to riches. Youtubers are making massive money for it because they are already known, and the issue of trust doesn't apply to them, take for example, Anomaly which is a known cheapskate in the trading business. Next, as you've mentioned, you have to be reliant on Valve for not making some foolish moves else your money will go down the drain. There are tons of trade-banned accounts even though they did not participate in a scam but rather bought scammed items, so there's also that.

tl;dr: CS:GO skin hoarding, trading and selling is good for a profit source but not really recommended as a main investment opportunity due to uncontrollable factors imposed by Valve.

[mindrust]

World of Warcraft also has a huge player base and an economy. (or was, last time i checked it was dying)

You can sell the gold you farmed in game and convert it to blizzard euros/dollars directly without needing any third parties.

At some point you don't even have to play the game.

All you have to do is stay in front of the AH and buy low sell high stuff which everybody here has a master's degree at.

I played it for a while but it became boring quickly.