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Crypto Meltdown Claims Rolex and Patek Philippe as Victims

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The cryptocurrency crash has claimed its first luxury victim: the Rolex Daytona.

After hitting all-time highs earlier this year, prices for the most desirable watches on the secondary market, including the coveted Rolex, have now fallen.

The pre-owned watch bubble was fueled by a combination of crypto and equity gains, stimulus cash, and speculation. That is now falling apart. So far, the demand for both new watches and other types of luxury items is holding up. But what’s happening in the secondary watch market is a stark reminder that the bling boom, particularly in the US, might not last.

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In 2021, a combination of roaring stock markets and cryptocurrencies bolstered wealth and ignited broader interest in investing in alternative assets, be it tokens or non-fungible watches. And when markets began to falter earlier this year, against the backdrop of rising inflation and geopolitical tensions, some investors were eager to put their money into more tangible stores of value, like a Rolex. Consequently, a new generation of young watch dealers joined the lifelong collectors. Lockdowns in China and fewer Russian buyers may have also increased supply.

Whether they were newbies or veterans, all buyers were chasing the same models. In February or March, the holy trinity of the most hyped watches—the Rolex Daytona, the Patek Philippe Nautilus, and the Audemars Piguet Royal Oak—were trading for many multiples of their retail prices. Skeleton pieces produced by Richard Mille were also highly sought after.

With the S&P 500 flirting with a bear market and Bitcoin losing about 70% of its value since November, that demand is now evaporating. Buyers are becoming more cautious. Higher interest rates, no stimulus payments and runaway inflation are also playing a role.

The biggest reversals have been in the Daytona, Nautilus and Royal Oak, models that saw the most dramatic gains. Prices are estimated to be around 25% below their peaks. However, this includes private transactions and may not be reflected in available market data.

Some brands are doing better, including Vacheron Constantin and Cie Financiere Richemont SA’s A. Lange & Sohne, as some collectors branched out beyond the more obvious names or ran out of prices. Some cheaper models, such as Rolex’s sister brand Tudor, did not see the same spikes as more expensive brands. And there is still an appetite for genuinely rare pieces, as opposed to those that are perceived as simply scarce.

While the correction in the secondary market may make it a bit cheaper to buy a Rolex, it won’t necessarily make it easier to get your hands on one.

Waiting lists for many new models are at least two years long, because not all gains in the aftermarket have been erased. Buying a Rolex in a store still feels like a bargain. Watches from Switzerland Group Plc, which operates boutiques in Britain and the United States, are also seeing supply outstrip demand for some Cartier, Omega and Tudor models.

The secondary market for other luxury goods, such as handbags, is vulnerable to some of the same elements that have inflated watch prices. It has also seen an influx of new, younger buyers, for example. However, it has held up so far, perhaps because although prices have risen, it has not experienced the same bubble.

However, what is happening in watches may be a taste of things to come in both luxury resale and high-end retail stores.

Many of the same factors that drove watches also drove demand in the core market for sneakers, handbags, and fine jewelry. Analysts at Jefferies have estimated that crypto wealth accounted for 25-30% of US high-end sales growth last year. The demand is also closely related to the stock markets.

Upcoming results from large luxury homes will likely show strong US revenue, but the second half of the year will be compared to a period in 2021 when sales rose. Many Americans will travel to Europe this summer to take advantage of the strong dollar, shifting their luxury spending to boutiques in Paris and London. But when they return home this fall, possibly having dipped into their savings, they may be more inclined to pull the strings in their wallet. Add the possibility of a recession, and the crucial holiday spending season looks more uncertain.

Of course, a revival in China could take over. Luxury stocks rose briefly this week after the country relaxed quarantine rules for incoming travelers.

But for the giants of bling, as in the watch market, time is running out.

More from other writers at Bloomberg Opinion:

Can’t find a Rolex or Patek Philippe? Blame the Reddit Crowd: Andrea Felsted

The wheels have come off electric vehicles: Anjani Trivedi

• Fintech Mistake Exposes Crypto Hype Risk: Lionel Laurent

(Updates with reading list at bottom of column.)

This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.

Andrea Felsted is a columnist for Bloomberg Opinion covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.

More stories like this are available at bloomberg.com/opinion

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