Meditations

Clearly these are the most challenging times that any trader has ever seen on Football Index.

Traders have had month worth of profits wiped out in days.

Many have lost a lot of money.

Plenty have lost faith.

It’s fair to say that there have been a lot of opinions about the platform. The problems, the positives and the future of it.

A lot of these have been reactive and emotional opinions expressed in under 280 characters.

While there has been a lot of great thoughts put out there, I just wanted to give my own in a version that is a bit more detailed and considered than I could express on Twitter.

I also wanted to make this an non-emotional as possible while still aiming to understand users emotions. So this is my take on the current market situation:

What went wrong?

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Many will tell you that the product and faulty market mechanics are solely to blame for the crash.

Personally I don’t think it is the case.

Don’t get me wrong, FI are far from blameless. They have failed to meet announced deadlines for big changes including market makers which is a big part of why this has happened.

But initially it was not a market mechanic problem.

Traders were more than happy to be buying shares of Jadon Sancho for £15 in September with the same mechanics. Whereas he currently sits without any offers when you can pick him up for under £7 with the same dividend pricing.

Considering the mechanics are the same, this suggests that the problems are primarily sentimental.

Traders were not happy with Football Index management. The delays that I’ve mentioned before are a big part of it and rightly so. Increasing competition from other companies such as Sportstack and Sorare also plays a big part in this as well.

Disappointed traders have taken money out of the platform and created further negative sentiment. They did this by reducing player prices and expressing negative opinions of the platform.

Considering this is a platform where many traders have only seen growth, any dips are frightening. Many traders have panicked because of this and left, creating a snowball effect of further falling prices.

Market mechanics

Up until this point, problems have mainly been sentimental. Then there became a point where the mechanics played their part.

When FI implemented the order books system, removing themselves as liquidity providers, the system had initially worked smoothly. LP1 was the only external liquidity provider and was handling the platform well.

This might have been a big reason why they didn’t make liquidity providers a priority. Why add more liquidity providers when the index was functioning fine without it?

The problem was, once traders sold up due to negative sentiment and removed liquidity, there wasn’t enough provided solely by LP1 to cover this.

Proper liquidity wouldn’t have prevented the initial crash, but it have helped prevent the next problem that emerged: no sell prices.

No sell price

For a lot of traders, the sheer number of players without a sell price is the final nail in the coffin.

Drop in player prices can be accepted. But the idea that you’re stuck with an asset and you cannot sell it? That is a major problem.

Not being able to withdraw your money from a platform leads to massive frustration within a userbase and makes the product appear fraudulent.

It really highlights the lack of liquidity on the platform and majorly damages trust, further contributing to this vicious cycle in a major way.

Covid-19

The impact of Covid-19 on Football Index has gone under the radar for me.

This is the biggest financial event to have happened across the world in decades.

Many people have lost their jobs or have been furloughed.

Financial markets have taken a huge hit, so is it any surprise that Football Index has also taken a hit?

Lots of people will have had to take money out to cover for losses, significantly affecting prices and liquidity, compounding the effects of negative sentiment.

Where do we go from here?

I think by everyone knows the current state of the Index.

A lot of lessons will be learnt, especially in looking at how much money people are investing. People who’ve lost money that they need in the short term will have unfortunately learnt this the hard way.

Most people will also know how ridiculously cheap most of these players are.

But the problem hasn’t been with the value on offer. The problem has been negative sentiment, reducing player price and lack of liquidity.

And while I truly do believe that the index will bounce back and prices will rocket soon, I also believe that, actually, it doesn’t matter if they doesn’t.

The dividends on offer, compared to current player prices mean that traders will easily be able to return their investment purely through dividends alone, if proper research is done.

Currently a lot of traders are holding out on reinvesting over fears that player prices are going to drop further.

For me, it doesn’t matter. The prices available are ridiculous value and I don’t believe that they have much further to fall.

The only real risk is if FI as a company collapse – which I believe we are very far away from.

future of the platform

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We know there is change coming in this Thursday. This isn’t a change to the market mechanics, but rather one mainly towards pricing that is aimed to change traders views on price.

Whether this announcement is the catalyst or not, the market will eventually rise again. Good prices or not, FI remains the best platform out there for yields by a mile.

When this happens FI have to rebuild from the ruins to create a platform with stronger foundations.

They underestimated the need for liquidity which is a mistake they can’t afford to make again. The fix is simple, but may take time. Traders will have to be patient.

I do truly believe that in a years time, this will all be forgotten about and the platform will continue to be the place where football fans can get the best return for their investment.

It will never be the same as a few years ago, where every average Joe could make a lot of money just because of the growth of the platform. Traders will have to step up. Money will be there to be made if you are good enough.

And while I understand that a lot of people wont, if you do have money to spend, then this could be the opportunity of a lifetime.

DJ

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