Are We Doing Diamond Investment Wrong?

March 31, 2025

| The several year slide in diamond prices may force a strategy re-think. |

For literally thousands of years, perhaps even longer than gold, natural diamonds have been valued for their beauty, rarity, and as a store of value. Icecap.Diamonds was created in 2020 in acknowledgement of this fact, and to offer investors a better venue for buying and selling.

Our goal was to eliminate the friction-points that have longed plagued this industry, specifically the traditionally-large spread that occurs between buying and selling. Forbes Magazine once explained that spread very simply: “Buy a $30,000 diamond from Harry Winston. Walk across the street and Tiffany’s will offer you only $15,000 for it.”

Actually, Forbes was optimistic. A bid of $5,000 to $10,000 wouldn’t have been surprising. No one’s being greedy. The high spread is because the traditional diamond market is structured as a one way river: moving diamonds from the mine, to the cutting factories, the wholesalers, the retailers, and finally onto the finger of a consumer. The industry is notoriously bad at accommodating anyone trying to sell upstream “against the current.”

Icecap’s innovation was to standardize diamond grading by using the tightest possible parameters, creating a mechanism where the diamond could be stored in a vault and ownership traded back and forth, and where a viable two way market could thus exist. Rather than trying to sell upstream, or even downstream, a diamond investor—with Icecap’s marketplace—could sell laterally, back and forth—to other traders.

It was and is a brilliant concept, but our timing was rotten. A healthy marketplace requires a flourishing pool of both buyers and sellers, which the diamond industry has traditionally had. Unfortunately, and thanks largely to human psychology, when prices are going up rapidly, everyone wants to buy. And vice versa. The first Icecap diamond was purchased in October 2020, just a few months after the 5-year chart above begins. Buying demand continued and accelerated, as diamond prices were doing the same thing. None of the Icecap traders wanted to sell. Things got so bad that by January 2022 our sales agents were screaming at us because there simply wasn’t enough supply. Diamonds coming on to the Icecap marketplace were snapped up literally in minutes.

Then, starting around April 2022, prices in the industry began falling. It was a combination of covid-era supply chain aberrations plus price competition from synthetics. (AKA: Lab grown diamonds.) At first, none of our customers wanted to sell; quite reasonably taking a wait-and-see approach. But by 2023 and 2024 traders were getting understandably impatient, and eventually the marketplace shifted to one where there were only sellers. 

You can’t trade back-and-forth in a marketplace with only buyers. Or only sellers.

Even if there were no investor-to-investor trades happening, Icecap was designed to use the wholesale industry itself as a buyer of last resort. But—for literally the first time in at least a hundred years—even that traditional stop-gap on diamond prices vanished. As explained in my blogpost last fall “What’s Happening In The Diamond Industry” the problem isn’t just the drop in price, it’s the fact that the market has essentially frozen. There is no liquidity. No one wants to buy, because no one knows what’s happening next. The industry thinks it knows what will happen next, eventually: the prices of synthetic diamonds will fall so low that they will be seen more as costume jewelry: something that may sparkle, but which has no enduring value because it has no rarity.

This isn’t a crazy prediction. That’s exactly what happened with synthetic rubies. At first, they vastly undercut and hurt the price for natural, but after a few years a demarcation occurred, and today there are two markets: natural and synthetic. Synthetic ruby can be purchased for around $6/carat wholesale, while a three carat natural ruby sold recently at Christie’s for $30,000.

Many expect that will happen with diamonds. But no one knows when. And the wholesale dealers have suffered such financial damage over the last few years that there’s no available cash with which to speculate. And that’s why there’s no liquidity.

So, even trying to determine what a liquidation price is on an Icecap diamond (or any diamond) today is almost impossible. If there are no (present) buyers, there is no price.

“What do you recommend I do?” has thus become the most common question we hear at Icecap—from our customers. And there are no good answers, other than: if you’re not forced to sell for cash flow reasons, then just hold indefinitely, until the market finally turns around. Not only is that the best answer, it’s almost the only answer. Again, the liquidity got sucked out of not just Icecap, but out of the entire industry.

I was discussing this problem recently with one of our sales reps, and he told me something interesting. Increasingly, customers he’s sold to our telling him they’re now thinking about their diamond investment differently. Rather than a diversification of their hard-asset portfolio, which already includes gold, silver, and maybe other tangible products, they’re seeing their diamonds as something one holds on to for decades—not necessarily waiting for a specific price—but as a form of inheritance to their loved ones.

Of course, that’s the one thing diamonds have excelled at, for that thousand years we were talking about. They’re easy to store. Unlike heavy gold bullion, diamonds can be secreted away most anywhere. They’re also extremely lightweight, so they’re portable. Most other hard-asset investments aren’t.

Unlike Europeans and Asians, Americans tend not to value lightweight portability, because they’ve had stable governments, peace, and prosperity for as long as they can remember. Most parts of the world have endured circumstances where people have literally had to flee. You can’t bring your gold, even less your real estate. But you can always bring your diamonds. And they can always be kept on you, or close to you. Those attributes alone arguably are sufficient justification to keep at least a small percentage of your net worth in diamonds. Call it the “insurance policy” reason, for an event that will probably never happen. But if it ever does…

Back to that inheritance concept. Most people with sufficient net worth to have considered diversifying into diamonds in the first place aren’t living paycheck to paycheck. They will almost certainly be leaving assets to their loved ones. There’s even a term for this: patrimony. And some types of patrimony are easier to pass on than others. Diamonds, easiest of all.

Icecap operates a trading platform, and doesn’t give investment advice. However, we do share interesting ideas when we hear them. We’re encountering a once in a thousand year disruption to the diamond industry, and it’s forcing everyone to re-evaluate their strategy.

Investors who diversified into diamonds—in normal circumstances a very reasonable move—are today suffering hugely and unfairly from what happened to the market over the last three years. And, again, there are no good options.

Against this background, it’s reasonable that some investors are now seeing their diamonds as a very private and confidential store of wealth, one that they hold on to personally and that can be passed on for generations—rather than as just another hard asset to trade. After all, diamonds have been filling this role of passing on wealth … for over a thousand years.

-Jacques Voorhees, President (jacques@icecap.diamonds)

ICECAP CUSTOMERS: If you haven’t yet taken delivery of your diamonds, you can start the process by going here. (https://icecap.diamonds/the-3-steps-to-redeeming-a-diamond/)