Bitcoin has reached a new high, is anyone showing off their Rolex on your Twitter?

Rolex, the "sentiment barometer" of the crypto market.

Written by: Pix

Compiled by: Luffy, Foresight News

In every encryption cycle, there comes a moment when wealth becomes visibly apparent. Not just on-chain or in portfolio screenshots, but in the real world.

A year ago, a person who was still unknown walked into a dealer's store, bought a watch with cash, and then posted a photo of it on their wrist online. At this moment, seemingly insignificant, it marked an important shift in market psychology.

Why a watch?

The logic is simple. Rolex is a Veblen good (note: referring to goods for which demand increases as the price rises).

The higher the price, the more people want to buy. They do not demonstrate value through functionality, but through price. Because what people buy is not practicality, but status.

When the new wealthy class quickly becomes rich, the first thing they want to do is to let others know that they are wealthy.

They won't buy farmland or government bonds. They will buy things that symbolize identity. Watches, cars, and sometimes they will buy JPEG format NFTs (Note: non-fungible tokens).

But the reality is not as simple as it seems at first glance...

Delayed Reaction

Comparison of Watch Index and Bitcoin Price from 2020 to 2024

In 2021, most people believed that the market for luxury watches would rise along with the encryption currency.

But if you look closely at the timing, the watch market did not thrive when Bitcoin first reached its historical high. Instead, it was during the second peak, when tokenized JPEGs (NFTs) once soared to the price of houses.

The surge in Rolex prices is 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 time is not long, but it is just enough to reflect the pattern. This can be seen in the data.

The watch index lagged behind during the rise of cryptocurrency, peaking slightly later, and then almost crashed in sync.

In the year following the cryptocurrency crash, the price of Rolex fell by nearly 30%. This was not due to a disappearance of demand, but rather because the type of identity demand driving that demand had depleted.

This makes the watch an unusual signal. They do not predict fundamentals, but rather reflect market sentiment.

Moreover, it is clearer than most of the indicators we currently have...

A Different Type of Indicator

In traditional finance, there is a volatility index. In the crypto market, there is a funding rate. But both are indirect measures of market behavior.

Luxury goods are different. They not only tell you what investors are doing but also what investors are feeling.

They feel how wealthy they are and how much they want the world to notice them.

This is not perfect. But when you see a watch being flipped at twice the retail price, or someone posting their custom NFT Rolex, it usually means the market is nearing its peak.

Because at that time, the wealth had already been earned and entered the consumption phase.

So, which stage of the cycle are we currently in?

Current Cycle

Currently, we are returning to historical highs. Bitcoin is rising, and Ethereum is also rising.

Even popular cryptocurrencies like ADA and XRP have risen by 50% in the past month.

However... the Rolex market is very calm. Prices are stable, and some models are even unsold. Dealers did not mention a shortage of supplies, and the premiums are not high.

At first glance, this seems to be a bearish signal, but the reality may be the opposite. The fact is that the profits of this cycle have not yet spread widely.

The recent Memecoin craze has only created hundreds of millionaires. This is not enough to drive a market built on a foundation of widespread speculative excess (referring to the watch market).

You can see signs of this pattern returning. There are more Rolex photos appearing on crypto Twitter (CT), and the mentions are increasing as well, but it is still far from the hype of 2021.

It is also worth remembering that last time, the watch market did not see fluctuations until the later stages of the cycle.

It was not during 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 often rhymes.

In the past few months, the situation has changed. The prices of Bitcoin and watches have started to move in sync. It is not perfect synchronization, but a clear correlation has emerged.

The previous cycle was not like this. In 2021, the watch market lagged. First, the cryptocurrency rose, followed by the NFT craze, and only then did the price of Rolex soar.

And this time, has the watch started to change? Well, not exactly...

This time, the chart shows a different appearance. The watch and Bitcoin began to rise almost simultaneously.

Since March, their trends have been almost in sync. But if you extend the timeline, the situation changes.

A more macro view

Bitcoin is close to its all-time high, but watches are not. Most styles are still far below the peak of 2022.

Apart from Rolex and Patek Philippe, the entire watch market is sluggish. Cartier, Omega, and even Audemars Piguet - prices are 30% - 40% lower than the retail price.

This is important because it conveys two pieces of information.

First, we are not yet in the frenzy stage. Second, most watches are still terrible investments.

Their design purpose is not to preserve value, but to showcase identity.

The rise in watch prices again does not mean that we have reached the top of the cycle, but it does indicate that we have gone through a significant part of the cycle.

People only start buying status symbols when they feel that the most difficult part has passed.

Usually, this is the middle of the cycle, roughly at two-thirds of the cycle.

Wealth is accumulating, confidence is returning, but the real consumption wave has yet to begin. When the consumption wave arrives, you will notice it without needing charts; you will feel it in a tangible way.