Larger Lab-Grown Diamonds and Crypto-millions - Our Brave New World?for 2022

Russell Shor?

#diamonds #luxury #jewelry #crypto-currency #NFT

December 2021?

At the outset of the Covid pandemic, everyone assumed we would hit the “pause” button for a few months before getting back to normal. Then as the disease dragged on, we said we’d put everything off to 2021. Now we’re at the end of 2021, and wondering if we can get back to to”normal” by 2023.?

Technology, however, has not taken a break. In our industry,?both lab grown diamonds (LGDs) and crypto-currencies have evolved like the world has been virus free.?

At the August JCK Show in Las Vegas, it was apparent that lab-grown diamond technology has marched steadily forward. In 2019, producers of these diamonds were showing quarters to half caraters, with some “experimental” larger goods, all priced about 40% below Rapaport rates for comparable quality natural stones.?

At the 2021 show, two-to five-caraters were the norm for lab-grown, 10 carat-plus goods were the “experimental” sizes, and all were priced 80% to 90% below Rap. And quality, in the form of color and clarity, has improved. But most importantly, retailers who’d told me several years ago that they’d never consider stocking lab-grown diamonds (“over my dead body” and all that), were actively shopping the lab-grown?sellers last August.?When I asked why the change of heart, the answer was unequivocal: “Our customers are asking for them.”?

This confirms a study by diamond analyst Edahn Golan, who reported that LGD prices dropped about 13% last year while consumer demand was rapidly increasing as they gained more acceptance from retailers and consumers.?

Indeed, producers can fine-tune quality much better now, usually through post-growth treatment, as well as make larger sizes.?De Beers’ Lightbox is now offering two-carat diamonds in colorless, pink, and blue, and is fine tuning a set of premium color ranges, according to a report from Michelle Graff in National Jeweler. Graff notes the cost of these premium stones is $1500 per carat, almost double the price of those below the D, E,F color range.?

It’s certain that lab grown technology will continue allowing producers to create larger and larger diamonds ever more cheaply. That’s a given.?More dangerously, some unscrupulous producers will continue working to make their products less detectable by gemology labs. It’s also certain that prices of lab-grown diamonds will continue to fall because producers have thus far failed to find a way of distinguishing their products from their competitors, except by (cheaper) price.?

Another technological development which has touched the industry is the growing acceptance of crypto-currencies in major transactions.?Although its impact on the industry is only peripheral thus far, the two major auction houses, Christie’s and Sotheby’s, began accepting payments in crypto for million-dollar-plus items this year.?

Combined, the auctions sell about $1.2 billion in top gems and jewels each year, both in their auction rooms and on-line sales, so these currencies can become a major force.?In June, Sotheby’s sold a 101.38-ct. D fl pear shape diamond named Key10138, for $12.3 million to a Hong Kong buyer who paid in an unspecified crypto currency (probably Ethereum or Bitcoin). While press reported the “wow” factor of the $12.3 million price tag, it should be noted that the $121,000 per carat price was 20% to 30% below the per carat prices of similar diamonds sold in the previous decade.?

Since then crypto-currency has become an integral part of auctions revenue stream and, as the year progressed, moved fully digital as payment for NFT — Non-Fungible Tokens.?This unappealing name refers to artwork created digitally and displayed on a monitor, and for which there is no physical copy. Christie’s reported that it sold more than $140 million worth of NFT artwork this year, including $69 million for a single piece - Beeple’s Everydays: the First 5000 Days.?It’s not likely that NFT “gemstones” will ever come to market, since their value is derived from their rarity as treasures from nature and set in jewelry to display them, but the auction houses say crypto is here to stay.

After the hammer came down on the Key10138 (image below, courtesy of Sotheby's) , Wenhao Yu, deputy chairman of Sotheby’s Jewellery in Asia, said. “Today we saw active participation from collectors across the globe as well as interest from new clients well beyond the traditional pool of collectors….opening up new possibilities and expanding our reach into a whole new clientele, many of whom are from the digitally savvy generation.”

Increasing use of crypto will certainly increase the challenges of adhering to Know Your Customer regulations deigned to keep funds from going to criminals and terrorist organizations. But technology will roll on in any case, and it’s certain that 2022 and every year to come will bring new developments to both enhance and challenge our industry.?