The L$/US$ exchange rate briefly experienced fluctuations for approximately one week in June. At the time, we interpreted this as being due to a number of factors, including uncertainty over our recent reorganization. Further research has shown this was also caused by the effect of merging Residents’ inworld and XStreet SL account balances in late March. Previously, Residents had two separate balances: one for inworld transactions, and one for XStreet SL transactions. Merging those balances provided a more convenient, efficient way for Residents to maintain and spend their L$ balance. Residents are no longer keeping a higher than historical average L$ balance across their two accounts and this process of reducing their total balances caused new L$ purchases to temporarily be lower while these “extra” L$ were used and/or added to the selling volume if the L$ were taken out of the economy. At this time, total Resident L$ balances have stabilized and are no longer falling.
Despite this temporary uncertainty and related market impact that caused sell volumes to briefly spike beyond purchase demand during one week, trading activity and the exchange rate have since returned to near historical levels.
The L$ exchange rate is a floating rate that can change based on supply and demand. Although Linden Lab employs a variety of methods including sinks, sources, and selling L$ from time to time, and tries to maintain a relatively stable money supply and exchange rate, we are committed to allowing the economy to fluctuate based on its own market forces. As in the real-world economy, these market forces can sometimes result in changes that can affect businesses positively or negatively in Second Life.
For more information on the Second Life economy in the second quarter, read today’s blog post.