by Jamie Holmes
BitGem Asset Management (BAM) will be launching PinkCoin, their diamond-backed virtual currency, on January 18th. It is the first of its kind, backed by Ethereum and a fixed pool of colored diamond assets. A crowdsale will start at 9am (EST) next Monday, where PinkCoin tokens will initially be available representing $1 of the initial pool valuation. Buyers will then be able to exchange these for Bitcoin or individual diamonds as per the pool’s current valuation.
On a regular basis the value of the pool of colored diamonds will be updated. The initial offering is 5 million PinkCoin tokens with an asset pool of $5 million. Up to 95 million PinkCoin will be offered in the future by BAM in a non-diluted manner. The pool of mainly pink diamonds have reportedly been insured by Lloyds of London and have been independently appraised. BAM is said to have purchased $4 million wholesale colored diamonds in 2015. The sample portfolio can be found here and is anticipated to be updated prior to the crowdsale.
Colored diamonds are not just jewellry; increasing demand for safe haven opportunities from the emerging global middle-class is turning colored diamonds into an investment market. Gold is seen as a traditional investment vehicle but now colored diamonds are also increasingly viewed as investments. Additionally, it has allowed men to flaunt their wealth and show their “masculinity” with more suitables colors, such as red diamonds, compared to standard diamonds. They are some of the rarest commodities in the world and possess the greatest wealth concentration of any investment vehicle. The average price appreciation of blue, pink and yellow diamonds was 195.23% over the period from January 2015 to October 2015. Pink diamonds saw the highest growth in value, almost 350% for the same period.
However, investing in these types of assets may not be suitable for everyone. Low liquidity, a lack of contacts and no dividends means that investing in virtual currencies backed by colored diamonds may not be an attractive opportunity to some. Also, BAM’s parent company, Precious Investments Inc., has been described as a shell company that has not yet earned any revenues from its planned operations. Both businesses are new launches, so PinkCoins should viewed as relatively higher-risk investment opportunity. Furthermore, ‘pre-mined’ virtual currencies have frequently attracted a bad reputation, where many altcoins have been labelled as ‘pump and dumps’ and quickly forgotten.
The BitGem decentralized marketplace should allow investors globally to have the opportunity to store and trade PinkCoin for other assets and asset-backed tokens as early as spring 2016, adding to the advantage of owning a fraction of the pool’s colored diamonds. This could potentially increase demand for colored diamonds further as it aims to improve liquidity and allow peer-to-peer trading in exchange for Bitcoin and any forms of payment compatible with Ethereum. If it can help address the negative aspects of investing in these assets effectively and proves itself to be a reliable, credible crypto-currency, PinkCoin (and the BitGem marketplace) could turn out to be an illuminating examples of how powerful Blockchain technology is; by allowing individuals to invest in opportunities that were not previously available to them it should help to address inequality and help people to build real wealth.