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DownDown The Market Dip of 2008 began during the week of 20 August, 2008 and lasted until approximately mid-September 2008. During this time, a large number of expensive items (most notably, Godswords) experienced an all time low in price due to a number of possible factors (see "Possible Causes", below). Most of the items affected by the crash are currently (as of June 2009) worth 10-20% more than their all-time lows associated with this crash or the time shortly after it.

Items affected by the crash

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Possible Causes

There were likely a variety of reasons for the crash, including:

  • School Starting: Many players start school in late August. The summer ending and many players selling items in anticipation of playing less while after the start of school could have been the primary cause of the crash. Conversely, many of the items that were affected by this crash rose slightly when school ended before Christmas 2008 and also near the end of May 2009. These rises were not nearly as significant as the crash of August 2008, but do suggest that school affects prices of the items concerned.
  • Player reaction to the upcoming Player vs Player servers due out late in the year: Players anticipating more powerful weapons and armour for player killing may have mass sold their existing weapons/armour prematurely.
  • An engineered effort by a group or clan of players to cause destabilization in the economy: A group of players may have come together and planned to cause havoc with the market values of high priced items. This is a possible scenario, but unlikely because the group of players would have had to stockpile items over a long period of time and sell them very quickly crashing the market, which is very uncommon compared to groups participating in buy-outs.
  • An update to the Grand Exchange caused some items to update more frequently by updating with a lower volume of goods traded, causing more frequent declines in high value items: It is possible that the declining prices caused many players to panic and sell their items for the minimum price, causing the price to continue falling.
  • The introduction of the Item Lending feature: There was some speculation that the Item Lending feature led to players not needing to buy an expensive weapon but rather borrow it from a friend. This would cause a reduction in sales, which could cause price drops. However, Item lending was released long before this crash, so Item Lending was not a major cause.

Effect on the Economy

The effect on the economy was such that many players had sold their items on the Grand Exchange to prevent further economic loss; however, this actually contributed to the snowball effect in that the more items that became flooded on the market, the less valuable they became.

Large-scale crashes are accompanied by panic-selling that makes the crash worse. This is similar to depressions in real life. Many players lost 10% or 20% of their net worth in the panic. However, items affected by the panic reach a far too low price after several days and subsequently are bought out and undergo a rise. In the August 2008 crash, the panic was so great that the subsequent rise in the prices of the affected items caused many of these items to be completely bought out and rise at 5% a day. Some players made millions by investing in items near the end of the panic, right before the rise started. This primary rise is then often followed by a secondary crash and a secondary rise, smaller in magnitude than the primary crash and rise. Eventually items stabilize below their original prices, with the prices reflecting the actual causes of the crash besides the panic.

By about 4 September 2008, many items affected by the crash were fairly stable, albeit this was not true for all items affected by the crash.

Recovery

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By 4 September 2008, the prices started level off, and in some cases, even went on the rise again. By the end of October, the market had completely recovered for the most part, but some godswords are still millions under what they were originally.

References

Malline:Wpalso

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