ADVERTISEMENT

The consequences of the collapse of cryptocurrencies in the luxury watch market

ADVERTISEMENT

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 have now dropped. The global pre-owned watch bubble was fueled by cryptocurrency and stock market gains, stimulus money and speculation. That is falling apart. So far, the demand for new watches remains. But the secondary market for luxury watches is a stark reminder that the bling boom may not last. In 2021, a combination of roaring stock markets and cryptocurrencies fueled wealth and sparked broader interest in investing in alternative assets, be it non-fungible tokens or watches. And when markets began to move sharply earlier this year, some investors were eager to put their money into more tangible stores of value, like a Rolex watch. Consequently, a new generation of young watch dealers joined the lifelong collectors.

Whether they were newbies or veterans, all buyers were chasing the same famous 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.

ADVERTISEMENT

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. The biggest changes have been to the Daytona, Nautilus and Royal Oak models, which saw the most dramatic gains. Prices are estimated to be around 25% below their peaks. Some brands are doing better, including Cie Financiere Richemont’s Vacheron Constantin and A. Lange & Sohne, as some collectors branched out beyond the more obvious names or ran out of prices. Cheaper models, like the Rolex Tudor stablemate, didn’t see the same spikes as higher-end brands. And there remains an appetite in the market 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 now, 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 of Switzerland Group, which operates boutiques in the UK and the US, also sees supply outstripping 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 increased demand in the mainstream 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.

A renaissance 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 luxury watch market, time is running out.

Andrea Felsted is a columnist for Bloomberg Opinion covering consumer goods and the retail industry.

subscribe to mint newsletters

* Please enter a valid email

* Thank you for subscribing to our newsletter.

sniloans