Tokenized Diamond Market Booms Amid Crypto Banking Crisis as Investors Seek Hard Assets – Here’s What You Need to Know
At the time when banks were collapsing last weekend and a major stablecoin depegged, tokenized diamond sales jumped 300%.
Investors turned their focus to digitized diamonds in search of safe haven amid high market volatility brought on by the collapse of no less than three banks in the United States. CoinDesk reported that Diamond Standard saw a surge in its marketplace following these bank closures.
Cormac Kinney, founder and CEO of Diamond Standard, said that the trading volume of the tokenized diamond surged nearly 300% during the last weekend. This jump in volumes was so large that the company’s marketplace, Diamond Standard Spot Market, stayed open nonstop.
Notably, per the CEO, most of those who bought these diamonds wanted out of stablecoins. He was quoted as saying that,
“[Sales] of diamond coins and other products increased substantially since Friday on the back of Silicon Valley Bank and Signature Bank being shut down by regulators, USDC breaking its [dollar] peg and amid fears of contagion spreading to other banks and to digital assets.”
The popular stablecoin USDC regained its $1 peg price after regulators in the US assured that depositors in Silicon Valley Bank (SVB) could access their money. USDC is the fifth largest coin and the second largest stablecoin by market capitalization with $37bn, while tether (USDT) sits in third place among all cryptos and first place among stablecoins with $76bn in market capitalization.
The New York-based Diamond Standard is a blockchain company that describes itself as a technology developer, diamond market-maker, and “the producer of the world’s first diamond commodities.” It tokenized the diamond market, enabling investors to invest in the mineral.
“Our goal is to unlock the potential of natural diamonds as a hard-asset for investors, like gold, silver, and platinum,” said the company, adding that it works with regulators, auditors, and financial sponsors to do so. And having these investment options is particularly relevant in times of market volatility and uncertainty when investors tend to focus on hard assets to shield them.
Furthermore, the CEO said that most clients working with the company aim to hold the asset for the long run, seeing it as an opportunity for portfolio diversification and hedging.
The company’s clients include individuals, family offices, and smaller hedge funds, and many of them have gold in their portfolio, seeing “diamonds as something that is uncorrelated to other assets.” Also, there is arguably room for the price of diamonds to rise and for investors to make money.
Interestingly, Diamond Standard is still primarily banking with Signature Bank, while having business deals with a few others, the report noted. Kinney argued that Signature is currently “the safest bank in the world”, given that the newly established interim entity will for a while be run by the Federal Deposit Insurance Corporation (FDIC).
As a reminder, the turmoil in the banking industry has so far led to three major bank failures in the US: Silvergate, SVB, and Signature Bank.
FDIC took control of Signature two days after the regulators closed SVB last weekend in a massive collapse affecting billions in deposits. Signature had $110.36 billion in assets and $88.59 in deposits at the end of 2022, per the New York state’s Department of Financial Services.
Signature’s collapse was the third-largest failure in US banking history, Silicon Valley Bank’s shutdown was the second, and the first was Washington Mutual, which collapsed during the 2008 financial crisis.
Along with the troubled Silvergate, Signature Bank was known as one of the biggest crypto-friendly banks in the US.
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