Author: Pix
Translated by: Tim, PANews
Every cycle has moments of showing off wealth.
It's not just about on-chain data or wallet screenshots, but more importantly, the display of wealth in the real world.
Someone who was unknown a year ago is now walking into a store and splurging on a luxury watch, then posting a wrist photo online.
This moment may seem insignificant, but it marks an important shift in market psychology.
Let's analyze this phenomenon from the most basic perspective.
Why watches?
The reason is simple, Rolex belongs to Veblen goods. (PANews note: Veblen goods are luxury items where demand increases as price increases, seemingly defying the law of demand.)
The more expensive the item, the more people want to buy it.
They do not showcase value through functionality, but through price.
People buy goods not for their utility, but for the status they represent.
Newly rich individuals, once they become wealthy, want the whole world to know about their wealth.
They don't buy land or government bonds.
They purchase symbols of wealth, watches, luxury cars, and sometimes Non-Fungible Tokens.
But this is not as simple as it first appears.
Lagging Indicator
Watch Index vs Bitcoin Price from 2020-2024
In 2021, most people believed watch prices rose in sync with cryptocurrencies.
However, looking at the timeline, the watch market did not boom when Bitcoin first hit its all-time high.
The watch market heated up again when Non-Fungible Token prices were as expensive as houses.
That Rolex trend was not the beginning of the crypto bull market, but a signal of market top.
The usefulness of this phenomenon lies in the lagging nature of the luxury goods market.
On the data chart, we can see that the trends are not much different, but perfectly timed.
The watch index rises later than cryptocurrencies, peaks slightly later, and ultimately crashes almost in sync.
Rolex watch prices plummeted nearly 30% in the year following the crypto market crash.
Not because demand disappeared, but because the core demand driving prices (identity symbolism) was exhausted.
This makes watches a non-typical signal.
They cannot reflect fundamentals, only market sentiment.
And the effect is clearer and more concise than most existing indicators.
An Alternative Indicator
In traditional finance, there's the volatility index (like VIX).
In futures markets, there's funding rates.
But these are indirect indicators.
Luxury goods are different; they reflect not just investor behavior, but their emotions.
How they think they are very wealthy and how much they crave world attention.
This is not a good sign. When watch prices are marked up to twice the retail price, or someone shows off their custom Rolex Non-Fungible Token, it often signals the top of the crypto bull market.
Since wealth has been created, the next step is naturally to spend it.
So where are we in this cycle?
What Stage of the Cycle Are We In?
Currently, we are again approaching historical highs, with Bitcoin rising and Ethereum rising.
Even older mainstream coins like ADA and XRP have risen 50% in the past month.
However, Rolex prices remain calm. Prices are stable, and some models are even slow-selling. Dealers have not reported shortages, and premiums are not high.
At first glance, it seems bearish, but it might be exactly the opposite.
The reality is that profits accumulated in this cycle have not yet been widely realized.
The recent MEME coin craze has only created a few millionaires.
In this hyped crypto market, this data is nothing.
However, you'll now notice that Rolex prices are rising again.
Posts about Rolex have increased on crypto Twitter, and discussions have become more frequent, but far from the 2021 fever.
Remember, the last time luxury watch sales picked up was late in the bull market: not when Bitcoin first peaked, but after the second peak, because by then everyone felt like they had become rich.
When everyone wants recognition, Rolex will become a choice.
History Doesn't Repeat, But It Rhymes
In the past few months, things have changed, and Bitcoin and watch prices have started to correlate.
The trend is not entirely consistent, but obvious enough.
In 2021, cryptocurrencies rose first, followed by the Non-Fungible Token boom, and then Rolex prices soared. The watch market has some lag, and they were not synchronized.
Is the Rolex market launching now?
Well, not exactly. This trend looks different.
Luxury watches and Bitcoin started rising almost simultaneously, roughly in sync since March.
But if you zoom in on the image, you'll see the differences.
Zoomed-In Trend Chart
Bitcoin is approaching a new all-time high, but watches have not.
Most indicators are still far below their 2022 peak. Except for Rolex and Patek Philippe, the watch market is overall declining.
Cartier, Omega, and even Audemars Piguet have dropped 30-40% from retail prices.
This data is important because it indicates two things.
First, we have not yet entered the market excitement phase.
Second, most watches are still a poor investment.
They were not designed to preserve value, but to convey emotional value.
Note: Watch prices rising does not mean we are at the market top, but it does indicate we are in the mid-stage of the bull market.
People are usually willing to pay for symbolic consumption after difficulties have passed. This typically suggests being in the middle of the bull market cycle, around two-thirds through.
Wealth is accumulating, confidence is returning. But true consumption has not yet begun.
When the moment of "getting rich and showing off" arrives, you'll know it, even without looking at chart indicators.
