Activity Across the Market (September 2021 Greysheet)

A good measure of strength for any market is the number of participants. While we have discussed the many positives of the current rare coin market in past issues, it has been very encouraging to see the level of market-making from many dealers. This includes posting bids and actively engaging in wholesale trading. There are seven dealers with more than $1 million worth of bids on CDN Exchange, and multiple more with bids well into the six figures.

In the most active series—Morgan dollars—there are more than 1,600 individual bids for various dates and grades from numerous dealers. Overall there are more than 15,300 bids for various U.S. coins with a value north of $150 million. This market depth, and its continued growth, is critical to the function of the market. In the above example of Morgan dollars, the vast number of bids offers high liquidity and keeps funds moving through the industry. Of course, in the early days of third-party certification wholesale bidding was arguably the most important part of the market, which set prices and influenced what was “hot” and what was not.

Much has changed since then, and now online auction sales, whether weekly, monthly, or named, have largely taken up the role of providing supply and setting market levels. The problem with this is that each auction, no matter how big or small, takes place in its own moment in time, and results can be skewed based on a wide variety of factors. This leaves collectors and dealers that wish to sell some or all of their holdings in an unsure place. Unless you are a major collector with an important collection your coins will often go to auction unreserved, and you will be subject to the vagaries of the market on the day your coins cross the virtual block.

Having a strong wholesale market that is supported by active bids provides a reliable alternative. Naturally, it is easy for dealers to post bids and buy coins when they are selling quickly. Right now, we have a situation in which there is greater demand than there is available supply. We also know that this will not last forever, but it is not impossible to predict—and prepare—for a time when the market levels off. Fortunately, this does not seem to be anytime soon, as the latest actions (or non-actions) of the Federal Reserve all but assure asset price inflation will continue. But, again we know hot markets do not go on forever, and it is damaging to the market if at the same time prices are correcting wholesale bidding disappears. The bids will be lowered, for sure, but dealers that are able to maintain them will provide an important floor and source of liquidity. As for right now, there are still a number of dealers, some with a large market presence, that do not participate in the wholesale bidding system. It is understandable that it does not fit the business model of some, but greater participation equals a stronger market. While every bid may not be hit, it provides a valuable reference point for the market. In the end, what we are all after should be a healthy market with good liquidity and depth, regardless if individual coin prices are surging or not.