I have been buying, selling, trading and analyzing rare coins and their prices for about 20 years now as a professional numismatist. In that time, I have bought and sold countless numbers of rare coins, ranging from $5 to $1.75 million each, and have developed a somewhat cynical view of them as “liquid” assets. While it is true there is usually always a buyer at some level, it is not like logging into Scottrade and getting a clear picture of what that bid is. The bid is usually coming from a guy who you have known for a long time, had dinner with, can trust his checks and will tell you the whole time how he just sold your exact type of coin for what he is offering you. If you “need” your rare coins to be liquid, the bid/ask spread becomes pretty big in a hurry. Be that as it may, the rare coin industry does function and understanding its function requires a lot of experience, pain, cashflow management, research and skill.
In the past six years, I operated Meridian Coin in Torrance, California as a brick and mortar retail rare coin shop. This differed from my prior business model of being on the national coin show circuit. One of the main differences was that I no longer made daily upside/downside risk calculations with regards to profit on rare coins that were subject to the “bid” community at rare coin shows and on the circuit. I lived in my coin shop, I could make my own bid that I knew would enable me to average out a 8-10% gross profit margin because I still have contacts with whom I shared market knowledge. Meaning, I could pretty much extrapolate what their bid would be without asking them with 95-98% proficieny.
Another aspect of having a coin shop is having to deal with gold, silver, platinum and palladium bullion in every type of trade imaginable. This was new as prior I really only dealt with rare coins. The beauty of bullion was that it was immediately liquid. Sure, you do not make much profit margin, with 2.5-3.5% being the average, but you could lock in low risk single base hits all day long. The downside was cashflow management and shipping/transportation risk, with cashflow management being the bigger culprit.
So how does all of this lead to Bitcoin?
I was involved in a small project years ago that led me to interact with some pretty smart people thinking about Bitcoin. Not just thinking about, but actually creating it, promoting it, theorizing it, etc. It was established at the time but not what it is today. We are talking less than $1000 per Bitcoin and that was after a major run up. There was excitement, mostly amongst intellectuals and people who understood “WTF” a blockchain was. I was skeptical about how Bitcoin would apply to my world, the world of bullion, rare coins and the like.
Fast forward to today. Here is how I look at Bitcoin as it applies ONLY to my life:
- It is a marketplace represented by a single unit of measure that is measured in USD in my case.
- It is volatile. Volatility creates opportunity.
- It is not anonymous. I mean, come on, I use Coinbase which requires more information than opening a bank account. Coinbase is kind of like having a Scottrade/TD Waterhouse/etc account that happens to trade Bitcoin.
- Trading is difficult at times. There can be sudden requests by Coinbase to provide more identification measures when you are trying to make a trade. This is problematic.
- Bitcoin provides me with a number to play with. Let’s face it, I cannot see myself using Bitcoin for any part of my daily commerce in the short to medium term. From a rare coin/bullion dealer’s perspective, it is just too complicated. Kings, Queens and “Dead Presidents” rule.
- It is not portable tangible wealth. Rare coins, bullion and diamonds are physical items that represent portable tangible wealth. If I have to be a “gold mule” if times get rough, at least I know it will be retrieved somehow. I could take my Ledger Nano and stick it up my ass only to find out Kim Jung Un detonated a 10 kiloton warhead and now I don’t have shit.
- It is totally fun to speculate on Bitcoin. For me, it is money that will either be worth a metric shit ton in the future or it will be worth nothing. It is a bet I am willing to make with money that is not critical to my survival. Furthermore, it is fun to trade a number that can have volatility of 20-50% in a week. As trading platforms and Bitcoin become more efficient, I will definitely use my experience trading coins/bullion to translate into emotionless and effective Bitcoin trading.
- I have absolutely nothing to offer the Bitcoin community other than to make money off this trend. I hate even updating my Mac, so there is no way I have the time to really understand the blockchain or the theory behind most other crypto currencies. I mean, Dash is a low sodium spice alternative in my mind.
To summarize, I will take rare coins and/or bullion any day. When it comes time to take hard earned money that needs to be there in the future and can be taken with me at a moment’s notice, nothing else compares.