In this week's FIC Weekly, I take a look at which players have risen the most throughout the week, I look into why we may be currently seeing a lack of movement in the market and I cover what you can expect to see from both Football Index and Football Index Club over the upcoming weeks.
Summary of the week
Over the last few months, I have been covering what has gone on throughout the Football Index market each week and it has been very exciting to see huge growth in players on Football Index, this has not been one of those weeks.
We have actually seen a slight decline in the total market cap this week, but only a very small drop and below I look into why this may be (I am sure most readers are very aware of the current issues, but I look into why we can remain positive about the outlook of Football Index for the upcoming months).
At first, those taking to social media to discuss the Matching Engine were largely very pleased as traders picked up bargains at lower prices and it added a new, game-changing dynamic to the platform which at first glance only seemed a good thing.
The outlook is now very different and although the majority of Football Index traders appear generally pleased with the Matching Engine, some concerns over the liquidity throughout the market (Especially the lower end) is causing some traders some serious uncertainty over the future of their shares.
The spreads right now undoubtedly make for an uncomfortable viewing for many and it can currently be a frustrating time for those who are eagerly wanting to sell shares to buy other players or even withdraw. However, it is so important to not focus on the current paradigm through which we see the market, as very soon we can expect to see a new layer added to the Matching Engine which will help fix some of the problems we are currently seeing.
The diagram below helps explain why the market has become fairly flat recently.
Phase 1 of The Matching Engine
So as we can see, there is currently a bit of a stand-off between buyers and sellers and the current lack of liquidity, amongst other issues, is resulting in some uncertainty. Therefore, many traders may hesistant to deposit further or/and are struggling to build a cash balance due to an understandable reluctance to instant sell players at very low prices. What we need more than ever is a facility which will help buyers and sellers meet in the middle...and that is where phase 2 comes in.
We should (Hopefully) soon see the introduction of the second phase of the matching engine where sellers will have the option to choose a sell price for their shares. Below is a diagram explaining how the increased amount of instant selling via traders matching sales as buyers and sellers meet in the middle should lead to more liquidity and eventually result in more confidence in the market leading to the market growing again.
*The 2% commission will also result in more market buys, especially as spreads tighten, which will help player's prices grow.
Phase 2 of The Matching Engine
Overall, there are serious concerns with regards to the liquidity throughout the market and it may take time for us to start to see growth in some areas of the market. Phase 2 will result in more matched bids as traders have the option to set a sell price, but this does not lead to higher prices.
However, as the market becomes more liquid with the option to choose a sell price, it is likely we will see tighter spreads and this will lead to traders becoming more confident in buying players. Furthermore, the 2% commission on matched bids will also result in more market buying.
When Phase 2 will be implemented is still an unknown, but for now patience with current holds may be key and for traders who currently are able to buy into more players, it is a great time to be a buyer as opportuntities present themselves throughout the market and it is often best to buy when the confidence throughout the market is low.
Top risers of the week (Currently Over 50p)
The top 3 risers of the week are Nuno Tavares (+15%), Jovane Cabral (14.47%) and Joe Willock (12%). What is quite noticeable about these players is that they are all young and have all gained more game time recently.
What was interesting between March-May was the clear trend towards buying players based on past data. With the lack of football, many traders took to using data to find 'value' throughout the market. Data is extremely helpful in finding potential players and a lot of the players that increased in price increased for the right reasons, but when player's prices rise so much that they become built up on the past data already, traders can start to look elsewhere and that certainly seems to have happened, to some extent, in recent weeks.
What's coming up?
On the topic of data, later this week there will be some useful content on the context of PB scores, covering high performing U23's in particular.
These upcoming blogs can help offer a new perspective on how to use data and the results will show how much of the market can ignore key pieces of information which we can exploit to improve our returns further.
As always, data used by Football Index Club on PB scores is sourced via Index Edge and if you haven't already - you can sign up for 2 weeks of free Index Edge here.