A Missing Asset Class

It's a bear market now, but a year ago startups like Rally and Otis were taking advantage of all-time-high demands for alternate investments. High-value items like art, shoes, and sports memorabilia were securitized, sold, and resold.

And during this bull run the numismatic market was left out.

Numismatics, or coin collecting, is an old hobby. I only say "old" instead of "dying" because I am a numismatist since childhood and I choose optimism. But despite the hobby's musty reputation, old, rare coins' characteristics make an attractive asset class for fractional ownership. So coins' absence from the alternate asset conversation is worth investigating in consideration of the hobby's future.

Any old coin has two sources of value:

  • Melt value: The price of the metal used to mint the coin. For some coins, this can be a couple thousand dollars.
  • Numismatic premium: The additional money a collector will pay out of preference for owning a coin due to its rarity, historical properties, eye appeal, sentimental value, and so forth.

Melt value elevates the coin's value beyond its printed denomination, while numismatic premium makes a coin non-fungible. Given the intense interest non-denominated in digital "coins" lacking melt value and non-fungible digital collectibles, these two value characteristics were a good match for the market.

Yet the coin market remains stubbornly stuck in the early 2000s century. Ebay remains the state of the art, community is mostly in-person, and bullion purchases run through websites that are the digital equivalent of a mail-order catalog (and still prefer checks due to payment processing fees). Discovering coin stores in a new city requires picking up the phone, and organizing and tracking your collection is an exercise left to the reader (and their Excel skills).

I've been collecting since I was ten. I've burned through hundreds of rolls seeking treasure in coin roll hunting, and can roughly grade a penny from circulation on sight. But it is a hard hobby to grow, and the industry's anti-digital characteristics hold it back from participating in bull runs.

And ultimately, growing the hobby is existential for coin enthusiasts: if numismatic premiums vanish for good, melt value may become an all-to-literal phrase.