The crypto and stock market crash has claimed a new victim.
The market of some luxury goods such as Rolex after reaching record highs earlier this year is suffering a price drop for the most desirable products, models that had recorded sky-high gains and are currently retracing more than 25 percent.
Rolex produces 1 million timepieces a year, but demand far exceeds supply for the Swiss brand, this scarcity has always been challenging for buyers who, in addition to creating long waiting lists, have built and nurtured a multimillion-dollar secondary market.
Contrary to popular belief, the scarcity of their products is not a market strategy (or at least not only), but stems, in addition to the enormous demand, from the nature of their products, luxury watches, complicated and precise, so watchmakers can’t just ramp up production at will.
It is estimated that crypto wealth, generated by massive gains from the last bull run accounted for 25%-30% of growth in US top-end sales last year.
The investors who were making these large profits, well predisposed to risk and speculation, wanted to rotate their money into more tangible assets of value, such as non-fungible tokens or timepieces, such as a Rolex, which is how a new generation of young timepiece dealers joined the longtime collectors.
Both new and experienced buyers were focused on the same models with limited quantities, out of production, and obviously high demand.
There are 3 in particular most hyped watches: the Rolex Daytona, the Patek Philippe Nautilus and the Audemars Piguet Royal Oak, these were traded on the secondary market for many multiples (minimum 3x) of their starting price.
But an early sign of weakness occurred between January and February of this year when the continued rise in prices was accompanied by a reduction in trading volume, a market for a scarce product full of speculators.
Low volume in a market can mislead buyers, with a rising price, for example, can give the impression that the market is stronger than it really is.
In fact the moment the stock and crypto market entered the bear market, with assets such as bitcoin more than halving in value, demand for luxury assets dissolved, buyers became more cautious and preferred to take refuge in dollars or at least in more classic assets and the opportunistic traders, who over-leveraged themselves, need to get rid of their acquired watches to meet financial obligations and/or to minimize their losses.
A good example of a bubble bursting…