Video game Counter-Strike – Eldorado for investors?

If you don’t know what Counter-Strike: Global Offensive is, ask your teenagers. Created in 2012, this first-person shooter video game pits two teams of five against each other. The goal is to destroy the opposing team or defuse the bomb they have planted in the game.

With exceptional durability, esports competition, and the 25 million monthly users worldwide that created this myth, it remains in 2022, ten years after its release, the world’s third most played planetary video game (excluding mobile games). Minecraft and League of Legends according to different ratings. Its developer, Valve, distributes it on its own Steam platform, on which, in one of the first cases, a community market was created for the purchase and sale of so-called “skins” between game users.

Skins are “decorations” of game objects: weapons, clothes, stickers… Generated by designers and earned by players, they can then be resold and bought on this market.

Our research, which will be published in the American journal Journal of Alternative Investments, shows their incredible returns compared to more traditional assets, but at the cost of significant risks.

$300,000 for an AK-47

Working with skins is simple: you create an account in the game, open a wallet with a minimum of 5 euros, and you can place buy and sell orders, from which the platform will take a commission of 5%. However, no currency may leave the Community market, only enter it. In addition, in order to exchange skins for real currency, you will have to join independent sites that provide themselves with variable commissions (from 0 to 10%).

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A survey conducted in 2019 showed that a significant part of game users are interested not so much in the game itself, but in the income that can be received from buying and selling skins. In February 2018, the famous “AWP Dragon Lore Souvenir” skin sold for over $61,000. This year, his new “AWP Souvenir Dragon Lore Factory New” version cost about $280,000. $300,000 even exceeded the AK-47 “ST MW 661”.

As big as they are, do these amounts offer some form of profitability? First of all, you need to understand the characteristics that form the cost of Skins. The type of weapon, its age, its reputation in the game and, in particular, during eSports competitions are taken into account. When these characteristics are controlled, we can observe the evolution of prices over time.

However, when it comes to investing, the return must be balanced against the risk. Are we insured against a sudden drop in prices?

Attractive investment despite the risk

The more volatile returns on an investment become, the more you may experience low returns when you need to sell. However, if skins are more profitable than gold, stocks, art, real estate, or fine wines in terms of returns, it comes at the cost of much more risk.

In general, some skins still retain some interest. Stickers, machine guns, and submachine guns, in particular, have a higher net risk return than many other assets. Moreover, their variations turn out to be weakly correlated with variations in other types of investments, which opens up interesting prospects for portfolio diversification and risk management.

Finally, it should be noted that these investments should be short-term. None of us knows what will happen to their value when the game they are inseparable from today disappears, unless the platforms guarantee their eternity through the Non-Fungible Token (“NFT”) system. It’s rare to find video games that are more than a decade old. As for your ethics as an investor, let’s bet that in these brutal times, it could very well be hit by the fury of a gun…

The original version of this article was été Posted in Talka news site à dedié to the exchange of ideas between academic experts and the general public.

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