There are a couple issues.
Diamonds will not only go down in value, they will be virtually useless. The items currently listed in the market for diamonds will eventually expire or be sold - so all items in auction will cost gold. The amount of items in the stores that people will buy with diamonds, or use for special packages, will be minimal.
The price of special items (blue, yellow, purple) will be very high and will actually balance-out the game.
- consider this. I recently entered Tier 3 (lvl 20) and bought all the great Tier3 stuff I could find for diamonds, regardless of cost. Instantly, I had the same equipment (or better) than most other Tier 3 players and could probably beat many lvl 29 players. This was possible because I paid cash for diamonds and then bought everything I needed. I 'bought' my ability to win. Now that diamonds cannot be used in the auction, players must actually PLAY THE GAME and SAVE THEIR GOLD in order to get the 100,000 gold needed for an epic body armour. It will take much longer to get enough gold to buy all the great items. Players will have to buy mediocre stuff, then upgrade bit-by-bit. It evens things out. That being said, it will suck for the guy that enters Tier 3 next week and all the good stuff has been re-listed in the auction for gold!
Another issue I have been wondering about is.... How is IH going to earn money? This game is a business that needs to earn money for the company. If people aren't buying diamonds very often, how will this game be profitable?