Rolex, the 'barometer of sentiment' in the crypto market.
Written by: Pix
Translated by: Luffy, Foresight News
In every crypto cycle, there comes a moment when wealth becomes visible. Not just on-chain or in portfolio screenshots, but in the real world.
A year ago, someone who was still obscure walked into a dealer's store, bought a watch with cash, and then posted a photo of it on their wrist online. This moment, seemingly insignificant, marks an important shift in market psychology.
Why watches?
The logic is simple. Rolexes are Veblen goods (i.e., the higher the price, the higher the demand).
The higher the price, the more people want to buy. They do not showcase value through functionality, but through price. Because what people are buying is not practicality, but status.
When the newly wealthy quickly become rich, the first thing they want to do is let others know they have money.
They will not buy farmland or government bonds. They will buy things that symbolize identity: watches, cars, and sometimes even JPEG NFTs (non-fungible tokens).
But the reality is not as simple as it seems...
Delayed response
2020 - 2024, comparison of the watch index with Bitcoin prices
In 2021, most people thought the luxury watch market would rise with cryptocurrencies.
But if you look closely at the timeline, the watch market did not thrive when Bitcoin first set its historical high. Instead, it happened during the second high, when tokenized JPEGs (NFTs) were once being traded at housing prices.
The surge in Rolex prices was not the beginning of a bull market, but the peak of a bull market.
The value of this phenomenon lies in the lag in the luxury goods market. The lag is not long, but just enough to reflect the pattern. This can be seen in the data.
The watch index lagged during the cryptocurrency rise, peaking a bit later, and then almost collapsing in sync.
In the year following the cryptocurrency crash, Rolex prices fell by nearly 30%. Not because demand disappeared, but because the identity demand driving that need was exhausted.
This makes watches an unusual signal. They do not predict fundamentals, but reflect market sentiment.
Moreover, it is clearer than most of our existing indicators...
A different type of indicator
In traditional finance, there is a volatility index. In the cryptocurrency realm, there is a funding rate. But both of these are indirect measures of market behavior.
Luxury goods are different. They not only tell you what investors are doing but also how they feel.
They feel how wealthy they are, and how much they want the world to notice them.
This is not flawless. But when you see watches being resold at double the retail price, or someone posting their custom NFT Rolex, it usually means the market is nearing its peak.
Because at that time, wealth had already been accumulated and had entered the consumption phase.
So, at which stage of the cycle are we now?
Current cycle
Currently, we are returning to near historical highs. Bitcoin is rising, and so is Ethereum.
Even 'mainstream' cryptocurrencies like ADA and XRP have risen by 50% in the past month.
However... the Rolex market is quite calm. Prices are stable, and some styles are even unsold. Dealers didn't mention supply shortages, and premiums are not high.
At first glance, this seems like a bearish signal, but it may actually be the opposite. The fact is, the profits of this cycle have not yet spread widely.
The recent Memecoin craze only created hundreds of millionaires. This is not enough to drive a market (referring to the watch market) built on widespread speculation.
You can see signs of this pattern returning. More Rolex photos are appearing on crypto Twitter (CT), mentions are increasing as well, but it is still far from the heat of 2021.
It's also worth remembering that last time, the watch market only began to fluctuate in the later stages of the cycle.
It was not at the first peak of Bitcoin, but after the second peak, when everyone felt wealthy, and everyone wanted to be noticed.
History does not repeat itself, but it rhymes
In the past few months, the situation has changed. Bitcoin and watch prices began to move in sync. Not perfectly synchronized, but a clear correlation has emerged.
The last cycle was not like this. In 2021, the watch market lagged. First, cryptocurrencies rose, then the NFT craze, and only then did the prices of Rolex soar.
And this time, have watches already started to change? Well, not entirely...
This time, the charts look different. Watches and Bitcoin started rising almost simultaneously.
Since March, their trends have been almost in sync. But if you extend the timeline, the situation changes.
A more macro picture
Bitcoin is close to historical highs, but watches are not. Most styles are still far below the peak of 2022.
Apart from Rolex and Patek Philippe, the overall watch market is sluggish. Cartier, Omega, and even Audemars Piguet — prices are 30% - 40% lower than retail.
This is important because it conveys two messages.
First, we are not at the frenzy stage yet. Second, most watches are still poor investment pieces right now.
Their design purpose is not to preserve value, but to showcase identity.
The rise in watch prices does not mean we have reached the peak of the cycle, but it does indicate that we have passed a significant part of the cycle.
People will start buying status symbols when they feel the hardest part is over.
Typically, this is the middle of the cycle, about two-thirds into the cycle.
Wealth is accumulating, confidence is returning, but the real wave of consumption has not yet begun. When the wave of consumption arrives, you won't need charts to notice it; you will feel it tangibly.
