Currently, it's a buyers market. It's a nightmare for sellers to find buyers for their wares, and it will only go downhill from here. I see alot of threads complaining about the market, but never pinpointing the problem, or offering a fix.
I'll take a stab at it.
Why is this happening to the market?
The reason why this is happening, is because
1. There are more and more items being gained and created every day, and almost none lost. This causes inflation.
2. There's absolutely no reason to make new characters besides color/name. Why gear more than one when you can switch weapons?
3. There is no way to lose an item besides human error.
Example: You have the only Avenger on the server, what does this mean? It costs much more, and more people want it.
Now what if you have one of a thousand Avengers on the server, and everyone that wants one has one as well.. or the chance to make it themselves? Yours is much less desirable.
Now, think about how people are farming and farming items, creating more. Every time someone adds to the pile of items, they drop the value of it and the buyers become in charge. Sellers are competing to undercut eachother so their item is more desirable to the less common buyers.. and it becomes a buyers market.
How do we fix it?
You must create a way for players to LOSE items. It's really that simple... if we keep gaining and gaining and never losing, the market will plummet until everything is almost worthless. Who wants a server full of Gran Faus and Divine Avengers? Noone, really. Let's take a look at some options.
1. Add a PvP mode or dueling, where people can stake items.. or have the possibility to DROP their items completely and looted by the killer.
2. Create more difficult, HIGH RISK gates with very worthwhile loot that when they fail or bail.. they lose their items. Alternatively, just make EVERY gate like this past a certain depth. What I'm trying to say is; you MUST succeed and finish to a safe area or else your items (or at least some) will be at risk. This will cause players to choose wisely as to what items they take into the gate, as they don't want to lose their most valuable ones.. and if they do, that's their fault. A new one will need to be purchased. Seller incentive.
Note: An auctionhouse, although very convenient, would only support a buyer's market.. as it will be easier for the seller to choose the best deal possible, and the sellers will be working even harder to undercut eachother in a clearly stated market.
I don't think the ability to lose items would help much. I would like to be able to destroy a few of the items that I don't use anymore, but it's a minor annoyance that I carry around all of these lower level non-trade-able items.
I think the solution lies more in making a place in the game where players can search a large open market of items being sold by other players in their own shops that they wouldn't have to be logged in to Spiral Knights in order to sell.