I bid on a niche yesterday and was perusing around thinking if it would be a good idea to bid on one again today. I noticed that the price for an initial bid went up. I checked the NRVE rate and saw the price to USD had fallen almost 50%. Then I was reminded that the starting bid was set to be around 75$ USD.
I find this platform fascinating from an economics perspective, and this got my mind wandering.
There is an intrinsic volatility in Niche prices because of to factors.
1. due to the user to niche ratio it seems unlikely that many people will be paying more than the initial bid value for a niche.
2. the price of the initial bid on a niche is set to a different currency than the currency used to purchase that niche.
A thought experiment
I bid on a niche for say 10K NRVE the price of which is set to .0075 USD )The price of the niche is set based on the ~75$ USD.) I got on niche along with 500 other people who all started bidding on niches day 1, I wait and start on say day 3. many other people's auctions finish before mine do, which shoots the price of NRVE up to say .03$ USD to NRVE (extreme perhaps but within the current market fluctuation.) I am not paying 4x what the expected price was for the niche, not based on competition for the niche itself, but on competition for the currency. As far as I can tell the NRVE currency is only really used for Narrative.
In order to encourage more niche purchases I would suggest this intrinsic volatility needs to be remedied. which I can only see three ways to do, and really only two good ways.
1. Set the minimum bid of a niche in the currency used to pay for it. If you want niches to be purchased via NRVE then say a niche's opening bid will be 5K NRVE, This would likely have a side affect of stabilizing the value of NRVE to some degree as well.
2. set the opening bid amount for a niche lower, this will allow the market to truly define the value of a niche. at the point of an auction is to allow the market to set the price, but right now with the price so high there isn't much benefit of the auction mechanism anyway. Setting the opening bid value lower truly allows the market to define the price, and the currency volatility plays less of a role as speculators will consider that volatility while determining market prices.
3. (the option i don't much care for but it is an option) allow bidders to lock in a NRVE to USD price at time of bid. This would avoid the volatility, but you might as well just have the bidding done in USD at that point really.
This is what I have been thinking on. I wonder if I am missing something. Is NRVE used for other transactions regularly? or is there a part of the market I am overlooking?