In the past, most ordinary investors found it difficult to gain direct exposure to commodities in a cost-effective and risk-adjusted manner; the bigger the niche, the harder it was.
Developments in the crypto world to deepen its offerings, and to reduce its volatility through the creation of novel investment vehicles, and interesting asset amalgams, have offered improvements. However, they have also been described as cosmetic or as a reinvention of what already exists.
At their inception, ETF’s were criticised in the same way. However, that supposed fintech fad fundamentally changed and now dominates the investment world offering a myriad of new options, disintermediating and crushing transaction fees.
Stablecoins have been described as glorified ETFs, and they have created a stable platform to transfer fiat into cryptocurrencies. Nevertheless, stablecoins do not serve as an appropriate vehicle for exposure to the gem market, let alone as a catalyst to improve it.
“Narrower funds, especially those with relatively few constituents — such as the ones flagged in the metals and mining, silver, and nuclear and renewable energy sectors — may present larger challenges in finding willing buyers for their portfolio securities. Likewise, authorised purchasers may have fewer options for hedging these specialised portfolios,” (Source: Elisabeth Kashner, director of ETF research and analytics at FactSet).
The argument that ETF’s, or stablecoins bring a functioning liquid framework to such markets, installing not only order but regulation, is disingenuous. The underlying market remains unchanged, the exact opposite of what is offered by the investment vehicle.
In contrast, the token-based offerings based on our forthcoming blockchain infrastructure and platform are the most suitable technology to use. They offer not only the most precise and effective vehicles for the job but also the potential to add a more transparent, and liquid alternative to the current gem market structure.