Investors flock to tokenized diamond as cryptobank crisis backs hard assets

The collapse of three prominent US banks over the weekend led to market volatility and much uncertainty about where investors could keep their money. Gold, the ancient safe haven, saw its prices rise by around 5% since last week, and another asset that caught investors’ attention was diamond – digitized diamond.

Diamond Standard, a blockchain company that tokenized and standardized the diamond market to allow investors to buy the previously difficult-to-invest in the gem, said it saw a big surge in the market after banks began closing.

During periods of market uncertainty, investors often flee to hard assets, such as cash, commodities and real estate to protect investments from volatility.

“[Sales] of diamond coins and other products increased significantly since Friday on the back of Silicon Valley Bank and Signature Bank being shut down by regulators, the USDC breaking the link, and on fears of contagion to other banks and to digital assets,” Cormac Kinney said. founder and CEO of Diamond Standard.

The company aggregates physical diamonds into a “coin” of standardized value that is stored in a vault. Each has eight to nine diamonds. The diamond-embedded tokens are digitized through an Ethereum-based digital coin, bitcarbon, which can be traded on various exchanges.

Trading volume for the tokenized diamond jumped nearly 300% over the weekend as investors scrambled to find safe haven, Kinney said. Most of the customers who wanted to buy tokenized diamonds wanted to get out of stablecoins, he said.

Most of the clients who bought into Diamond Standard’s coins were long-only, meaning they wanted to buy and hold the asset to diversify their portfolios while participating in the upside, Kinney said.

“Our investors, who very often have gold in their portfolios, see diamond as something that is not correlated with other assets,” giving them an opportunity for diversification and hedging, he said. Kinney noted that the price of diamond remains in line with other precious metals, opening doors for investors to participate in the appreciation.

Most of the buyers are existing clients, which include individuals, family offices and some smaller hedge funds, Kinney noted. During the chaotic weekend, the Diamond Standard Spot Market, a peer-to-peer marketplace with a centralized limit order book, remained open 24/7 and handled a jump in volumes, the company said.

Kinney, a software entrepreneur and developer of market heat maps, started Diamond Standard in 2018 with the goal of opening up the $1.2 trillion diamond market to a wider group of investors.

The firm’s patented technology is designed to create a more transparent system that allows investors to track supply chains and subsequent ownership of the world’s ultimate bling more easily and efficiently. The company also standardized the value of diamonds by creating a unified system through blockchain technology.

Kinney said his company primarily banks with Signature Bank, although it has relationships with other banks. While the weekend’s events had been worrisome at the time, he says the company is still using Signature Bridge Bank — a new temporary entity that will be temporarily run by the Federal Deposit Insurance Corporation (FDIC) — which has transferred all of the deposits and the majority of assets to the former Signature Bank.

“We use Signature Bridge Bank. It’s the safest bank in the world right now,” Kinney said.