A technological facet for investing in diamonds
Can a diamond become a new Safe Haven for investors? What is the market and trading potential when the diamond and financial markets get linked? Is there an opportunity to transform diamonds from a unique asset to a transparent, fungible asset?
The crypto market can be risky, volatile and unpredictable - not exactly the stable environment for your next best investment… or is it? Until now, the prospect of creating an investible vehicle for diamonds as an asset class has been vague due to such risks for investors as low liquidity, lack of fungibility, lack of transparency and standardization.
Yet in the digitalization era, by virtue of innovative tools the obstacles that have prevented diamonds from becoming a tradable asset class earlier are starting to be overcome and thus giving opportunity to transform diamonds into a new tradeable commodity and make the diamond market accessible. Now there can be a fair, orderly and transparent marketplace for traders and accredited investors to acquire raw or polished diamonds on a global scale, at market prices driven by real time transactional data. Investors may be able to easily and securely trade in diamonds, while enabling diamond holders to effortlessly liquidate their assets.
Nowadays fintech industry offers platforms that include a proprietary algorithm which evaluates and rates the market price of diamond tokens and allows investors to confidently trade in diamonds, without relying on expert intermediaries. Such tokens represent a stone’s ownership, characteristics, and trade history — thus affording users to have a track record for a particular stone. Meanwhile among features of a platform is adherence with all applicable regulatory requirements of KYC/AML, while still respecting the principle of data self-sovereignty of the user. As a general practice the platforms also have their own cryptocoin suitable for payments, hedging, lending which gives investors and holders the ability to buy diamonds on its platforms.
The platforms allowing diamonds to be traded as a commodity with thousands of orders processed per second from multiple co-located clients, may also encompass the exchange and the depositary that is built around a scalable ecosystem of approved suppliers, broker members, custodians, grading labs and settlement banks. The unique nature of each diamond on the exchange enables trade of diamonds of different sizes, values and diversified risk profiles; with a low carry cost. The exchanges investment tools can indicate fair market prices and proposition attractiveness levels across many diamond categories to cater for investors’ appetite for risk.
Traditional diamond trading can be very complicated and intimidating to non-experts but innovative tools can remove this complexity. The technology can bridge the gap between the current diamond ecosystem and the future diamond investment market through a tokenization process which transforms diamonds from a unique asset to a fungible asset with clearly defined values. Now investors have opportunity to create a solid investment asset for trading that will increase diamond supply and demand and revolutionize a traditionally closed market.