Amidst the chaos of last weekend’s bank failures and the massive shutdown of stablecoins, investors have found solace in a surprising asset class: tokenized diamonds.
As the market’s volatility peaked, CoinDesk reports that digital diamond sales surged 300%, with the Diamond Standard market leading the way.
Founder and CEO Cormac Kinney confirms that the surge in trading volume was so significant that the Diamond Standard spot market remained open continuously.
Notably, according to the CEO, most of those who bought these diamonds wanted to get stablecoins. He quoted that,
“[Sales of] diamond coins and other products have increased significantly since Friday due to the closure of Silicon Valley Bank and Signature Bank by regulators, the USDC breaking the [dollar] peg, and fears of contagion to other banks and digital assets. .”
Popular stablecoin USDC has restored its pegged price of $1 after US regulators assured investors at Silicon Valley Bank (SVB) that they can access their money.
USDC is the fifth-largest coin and second-largest stablecoin by market cap at $37 billion, while Tether (USDT) ranks third among all cryptocurrencies and number one stablecoin with a market cap of $76 billion.
Diamond Standard, based in New York, is a blockchain company that describes itself as a technology developer, diamond market maker, and “the world’s first producer of diamond goods.”
The company has tokenized the diamond market, which allows investors to easily invest in this mineral.
“Our goal is to unlock the potential of natural diamonds as valuable assets for investors, like gold, silver and platinum,” the company said, adding that it is working with regulators, auditors and financial sponsors to do so.
Having these investment options is especially important in times of market volatility and uncertainty, when investors tend to focus on hard assets to protect them.
In addition, the CEO said that most clients who work with the company are looking to hold the asset for the long term, seeing it as an opportunity for portfolio diversification and hedging.
The company’s clients include individuals, family offices and small hedge funds, and many of them have gold in their portfolios, seeing “diamonds as something that is not tied to other assets.”
Also, there may be an opportunity for diamond prices to rise and for investors to make money.
Interestingly, Diamond Standard still primarily banks with Signature Bank , while having business deals with several others, the report noted. Kinney argued that Signature is currently the “safest bank in the world,” given that the newly created interim entity will be governed for a time by the Federal Deposit Insurance Corporation ( FDIC ) .
We will remind you that the upheavals in the banking industry have currently led to the bankruptcy of three large banks in the USA: Silvergate , SVB and Signature Bank.
The FDIC took control of Signature two days after regulators shut down SVB last weekend in a massive collapse that affected billions in deposits.
Signature had $110.36 billion in assets and $88.59 billion in deposits at the end of 2022 , according to the New York State Department of Financial Services.
Signature’s collapse was the third-largest in U.S. bank history, with Silicon Valley Bank’s closing second and Washington Mutual’s first , which collapsed during the 2008 financial crisis.
Along with the troubled Silvergate, Signature Bank was known as one of the largest cryptocurrency banks in the US.
