Author: Pix
Compiled by: Tim, PANews
There are moments to show off wealth in every cycle.
What is shown off is not just the on-chain data or the wallet screenshots, but more importantly the display of wealth in the real world.
Someone who was unknown a year ago now walks into a watch shop, spends a lot of cash to buy famous watches, and even posts photos of his wrist online.
This may seem insignificant at this time, but it marks an important shift in market psychology.
Let us analyze this phenomenon from the most basic level.
Why a watch?
The reason is simple, Rolex is a Veblen good. (PANews Note: Veblen goods refer to luxury goods whose demand increases as their prices rise, which seems to violate the law of demand.)
The more expensive the product, the more people want to buy it.
They don’t show value by functionality, but by price.
People buy products not for their practicality but for the status they represent.
Once the nouveau riche become rich, what they want most is to let the whole world know about their wealth.
They don't buy land or government bonds.
They buy symbols of wealth: watches, luxury cars, and sometimes NFTs.
But all is not as simple as it first appears.
Lagging indicators
Watch Index and Bitcoin Price 2020-2024
In 2021, most people believe that watches will rise in tandem with cryptocurrencies.
But from a timing perspective, the watch market did not experience a boom when Bitcoin first hit its all-time high.
When NFTs become as expensive as houses, the watch market becomes hot again.
That Rolex rally was not the beginning of a crypto bull market, but a signal of a market top.
What makes this useful is that the luxury goods market has a lag.
On the data chart, we can see that the trends of the two are not much different, but just right.
The Watch Index lagged behind cryptocurrencies in its rise, then peaked a little later, before eventually crashing in near lockstep.
Rolex watch prices plummeted nearly 30% in the year following the crypto market crash.
It’s not because the demand has disappeared, but because the core demand that drives the price (status symbol) has disappeared.
This makes the watch an atypical signal.
They do not reflect fundamentals, only market sentiment.
And the results are clearer and simpler than most existing indicators.
An alternative indicator
In the traditional financial field, there are volatility indices (such as the VIX index).
There is a funding rate in the contract market.
But both of these are indirect indicators.
Luxury goods, on the other hand, reflect not only the behavior of investors but also their emotions.
They think they are very rich and they crave the attention of the world.
This is not a good sign. When you see a watch being priced at twice the retail price, or someone showing off their customized Rolex NFT, this is often the top of the crypto bull market.
Now that wealth has been created, the next step is naturally to squander it.
So where are we now?
Where are we in the cycle?
We are currently approaching all-time highs again, Bitcoin is rising and Ethereum is also rising.
Even older mainstream coins like ADA and XRP have risen by 50% in the past month.
However, the Rolex price market is calm. Prices are stable, and some models are even unsalable. Dealers are not reporting shortages, and premiums are not large.
What may seem bearish at first glance may actually be the opposite.
The reality is that the profits accumulated in this cycle have not yet been widely realized.
The recent meme coin craze has created only a handful of millionaires.
This data is nothing in this hype-filled crypto market.
But now you will find that the phenomenon of Rolex prices rising is happening again.
There are more posts about Rolex on crypto Twitter and more discussion, but nowhere near the level seen in 2021.
Also remember that the last time luxury watch shipments didn’t pick up until late in the bull market: not during Bitcoin’s first peak, but after the second, because that’s when everyone felt like a millionaire.
When everyone wants to have a sense of presence, Rolex will become a choice.
History doesn't repeat itself, but it rhymes
Over the past few months, things have changed a bit, and the price of Bitcoin and watches have started to move in tandem.
The trends are not exactly the same, but they are clear enough.
In 2021, cryptocurrencies rose first, followed by the NFT craze, and then Rolex prices soared. The watch market has a certain lag, and the two are not synchronized.
Is the Rolex market starting now?
How should I put it? Actually, no, the trend looks a little different this time.
Luxury watches and Bitcoin started rising at almost the same time, and they have been moving more or less in sync since March.
But if you zoom in on the picture, you'll notice something different.
Zoomed in trend chart
Bitcoin is approaching new all-time highs, but watches are not.
Most indicators remain well below their 2022 peaks, with the exception of Rolex and Patek Philippe, and the watch market as a whole in decline.
Cartier, Omega, and even Audemars Piguet, prices have dropped by 30-40% compared to retail prices.
This data is important because it shows two things.
One is that we haven't entered the market excitement period yet.
Second, most watches are still a terrible investment.
Its original design intention was not to maintain value, but to convey value emotions.
Please note: The watch is rising does not mean we are at a market top, but it does indicate that we are in the middle of the bull market.
People always wait until the hard times are over before they are willing to pay for symbolic consumption. This sentence usually means that it is in the middle of the bull market cycle, about two-thirds of the way.
Wealth is accumulating and confidence is returning, but real consumption has yet to start.
When the moment of "get-rich-quick consumption" comes, you will know it even without looking at the chart indicators.
