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Crypto Meltdown Claims Rolex and Patek Philippe as Victims

The price of the most popular secondhand luxury watch peaks. This is the latest sign that the bling boom may not be permanent.

Crypto Meltdown claims its first luxury victim: Rolex Daytona. After hitting record highs earlier this year, the price of the most coveted watch in the secondary market, including the alluring Rolex, has dropped. The bubble of secondhand timepieces was fueled by a combination of crypto and stock-market gains, stimulus cash and speculation. Which is now being unveiled. So far, the demand for both new watches and other luxury goods has grown. But what is happening in the secondary watch market is a clear reminder that the bling boom, especially in the United States, may not be permanent.

In 2021, the combination of roaring stock markets and cryptocurrencies has strengthened resources and aroused a greater interest in investing in alternative assets, whether non-fungible tokens or timepieces. And when markets began earlier this year amid rising inflation and geopolitical tensions, some investors were eager to put their money in more expensive stores, such as Rolex. As a result, a new species of young timepiece traders joins long-time collectors. Lockdown in China and less Russian buyer supply could also increase.

Whether they were newborns or old hands, buyers all ran after the same model. Between February and March, Holy Trinity traded the most popular watches – the Rolex Daytona, the Patek Philippe Nautilus, and the Admars Pigeon Royal Oak – at multiple multiples of their retail price. Skeletal fragments produced by Richard Mill were also in high demand.

The S&P 500 flirted with a bear market, and since November Bitcoin has lost about 70% of its value, that demand is now evaporating. Buyers are becoming more cautious. High interest rates, the absence of stimulus and rising inflation are also playing a role.

The biggest changes have been made to Daytona, Nautilus and Royal Oak – the models that have experienced the most spectacular gains. Prices are estimated to be about 25% lower than their maximum. This includes personal transactions, though, and may not be reflected in available market data.

Some brands, including Vieron Constantin and A. Lange & Sohne of Cie Financiere Richemont SA, are doing well, as some collectors were out of variety or the most obvious names. Some cheaper models, such as the Rolex sister brand Tudor, did not see the same spike as the Marks in the price. And the hunger for truly rare pieces continues, in contrast to what is only considered rare.

While modifications to the secondary market may make it a bit cheaper to buy a Rolex, it may not necessarily make it easier to hold on to.

The waiting list for many new models is at least two years long, as not all profits in the secondary market have been erased. Buying a Rolex in a store still feels like a bargain. The watch from Switzerland Group Plc, which operates boutiques in the UK and US, is also surpassing supply demand for some Cartier, Omega and Tudor models.

The secondary market for other luxury goods, such as handbags, is risky for some items that increase the price of watches. For example, it has also seen an influx of new young shoppers. Yet it has still been resilient, probably because even though prices have risen, it has not felt the same bubble.

Even so, owning one is still beyond the reach of the average person.

Many of the same reasons as the rise of watches have increased the demand in the primary market for sneakers, bags and fine jewelry. Analysts at Jefferies estimate that crypto assets accounted for 25% -30% growth in U.S. top-end sales last year. Demand is also closely related to the stock market.

The forthcoming results of large luxury homes will likely show strong U.S. revenue, but the second half of the year will compare to a time in 2021 when sales were rising. Many Americans are traveling to Europe to take advantage of the strong dollar this summer, shifting their luxury spending to boutiques in Paris and London. But when they return home this fall, perhaps sinking their savings, they may be more inclined to pull the strings of their purses. Add the possibility of a recession, and the important holiday season looks even more uncertain.

Of course, a resurgence in China could lead to relaxation. Luxury stocks rose briefly this week after the country simplified segregation rules for inbound travelers.

But for bling behemoths, like the watch market, time is running out.

Andrea Felstad is a Bloomberg opinion columnist covering consumer products and the retail industry. Previously, he was a reporter for the Financial Times.

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