Procyon Games

The graph shows the total number of L$ for sale, within 10 Lindens of the best price. There's two key features to note. First, the total number of Lindens for sale has remained fairly constant—around 210 million. Second, there are visible bands sloping slowly downward.

What this means is that the people who have posted L$ for sale at 261-265 have gotten impatient, cancelled their sell orders, and reposted them at the higher (devalued) rate, 267L$/USD. There's still far too many L$ for sale. At the current size of the Second Life economy (and it's been this size for some time), the Lindex can only maintain a balance of half that size, around 100M L$ in outstanding sell orders. If it gets much more than that, it takes too long for a sell order to be filled, and people start to move their orders to cheaper prices so they can convert their L$ to USD.

So how long will the L$ continue to fall? In the best-case scenario, it will eventually reach an equilibrium where it becomes cheap enough that it entices more buyers to enter the market. If and when that happens, we will start to see the total volume of outstanding sell orders begin to drop. So far, though, I don't see any sign of that happening.