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The world of e-currency took a long-expected turn at the beginning of August when bitcoins split in two. While there are other cryptocurrencies, bitcoin was the most widely accepted and used. While investing implications are still up in the air, with the fork producing equal shares in two independent currencies, the split brings opens up interesting questions for alternative investment ideas. This series will investigate odd opportunities for investing, past and present, whether there is true potential and if the investment panned out.
The first strange investment comes courtesy of recent politics. The US slapped Venezuela with sanctions after their leader took actions that screamed “dictator.” President Nicolas Maduro’s assets in America are frozen, and US citizens barred from doing any business with him, among other economic sanctions.
Naturally, the country’s currency, the bolivar, took a nosedive. On July 14, Twitter user Kaleb noted his country’s currency, as counted on the black market, was worth less than virtual gold in the mega-hit massively multiplayer online game World of Warcraft.
The Bolivar and the Black Market
Exchange rates on the bolivar have been in a landslide since Maduro took office in 2013. In 2015, the bolivar was about 279 bolivars to the US dollar. It’s important to note that most Venezuelans turn to the black market for essential goods, so the black market tracks the price of the bolivar to the dollar. Kaleb’s post noted the bolivar was at about 8,494 Bs.F to 1 USD.
But with the sanctions, the exchange rate took a nosedive at breathtaking speed. On Aug. 7, Dolar Today, a site that tracks the black market bolivar, put the exchange at 18,982.93 Bs.F. to 1 USD.
World of Warcraft Gold
The interesting investment comes in the form of another virtual currency, with a specific use: buying and selling items in World of Warcraft, the famous online game. On Aug. 8, a token used to purchase gold with real money (which can also be used to buy more game time in lieu of a subscription) was trading for 140,526 gold at a flat rate of $20. That works out to about 7,026 gold per dollar, meaning WoW gold is far stronger than the bolivar.
The price of gold spiked between Aug. 2 and 3, just a couple days after the sanctions were put in place, with a token trading in the 320,000 gold range.
In short, WoW gold is a better investment than the bolivar. Except for a hiccup, it stays fairly stable, while the bolivar is in a downward spiral. With the future of the bitcoin and its spinoff bitcoin cash uncertain, and with wallets inevitably going digital, WoW gold could be an interesting investment opportunity (especially for Venezuelans).
While Blizzard-Activision, the owners of WoW, no longer release population data, it is estimated there are between 5 and 8 million active players. The population of Venezuela is about 31.5 million, or about three times the size of the game population. Yet, their currency is half as strong compared against the US dollar.
(Lack of) Tax Implications
Gold purchases were only recently implemented. For the majority of the game’s life, gold “farmers” would endeavor to collect gold and sell it for real money, under the table. Wanting to curb this behavior (and get in on a piece of the pie), Blizzard introduced tokens. However, unlike some games that allow cashing out of their version of tokens for money, WoW is a hybrid system. Money can go in, but not out.
This is different than using bitcoins, or selling virtual real estate in Second Life, another online game, as WoW tokens are not taxable. In other cases, as virtual currency is not legal tender, it is considered property for tax purposes.
As an aside, an in-game stereotype is the Chinese gold farmer, alluded to earlier. A player, often from China, works day in and day out to make gold and sell it for real money, under the table, avoiding any taxes. While the token system has helped fight this, it still happens in dark corners of the internet. These sites are not always secure, and it’s not uncommon for gold sellers to attempt phishing in order to steal login credentials. As with all online shopping, it is better to use trusted sources and protect your password.
If all else fails, investing in WoW gold could provide some entertainment, and will still be better than what is essentially bread for a wheelbarrow full of bills. With digital currency just now catching on, WoW gold can be a fun (if not entirely profitable) investment.
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