So, what should you do as a crypto investor? It’s time to liquidate. And thousands of watch collectors spooked by weak crypto are turning to the secondary market to recoup their losses.
The crypto bubble bursts
The crypto downturn was sparked by the collapse of the terraUSD stablecoin, which was designed to peg the price of the US dollar on a one-to-one basis through an algorithm, but without the actual cash reserve to back it. Unfortunately, the stablecoin lost its dollar peg, which also led to the collapse of its sister token, Luna.
Luna’s collapse had a knock-on effect to other cryptocurrencies and all the companies that were involved in its trade, including a major crypto hedge fund company called Three Arrows Capital, which later filed for bankruptcy.
With Luna deemed worthless, its investors lost millions overnight.
As a result of the spiralling market, owners have been quick to unload their tangible assets, especially those luxury watches. Chrono24, an online marketplace for luxury watches, states that the recent crypto crash “has directly impacted pricing of luxury watches from brands like Rolex and Patek Philippe”, due to a surplus of rare luxury watches on the secondary market.
Tim Starcke, co-CEO of Chrono24, said the reduced demand for certain models had caused “prices of some of the most sought after timepieces to fall closer in line with those of similar watches [that usually sell for much less].” For example, prices for highly coveted models like the Rolex Daytona have fallen by 25 per cent, while prices of the Submariner model are starting as low as US$10,000.
Starcke explained, “In recent months, prices for individual models from certain collections have risen extremely, while very similar watches – for example, the Patek Philippe Nautilus 5712/1A with moon phase display – have seen much less growth in value by comparison.”
“In this respect, an adjustment and homogenisation of prices within the model series is also currently taking place.”
High-end timepieces flood the secondary market
Prior to the crypto crash, prices for second-hand ultra-rare luxury watches had gone through the roof. Just last year, a 1957 Omega Speedmaster was sold for US$3.4 million – the most ever for an Omega at auction. While a Philippe Dufour Grande et Petite Sonnerie 3 timepiece, worth US$10 million, became the most expensive independent watch ever sold at auction.
Much of the luxury watch market was also supported by those investing in crypto. As reported by Bloomberg, the surging values of cryptocurrencies minted a new class of luxury buyers that drove up the prices for many popular luxury watch brands, like Rolex, Audemars Piguet and Patek Philippe.
Since prices have plummeted, however, many of these investors have changed their tune. Chrono24 states that there are currently more than 87,000 Rolex watches available on the resale platform – a supply that is “much larger” than in years past. Plentiful models include the previously mentioned Rolex Daytona, which decreased in price by US$12,000.
“We have seen a massive increase in offering on our platform and that ultimately drove the prices down,” Starcke said. Earlier this year, the platform had only around 300 Rolex Daytona 116500LN models listed on its site, but today there are approximately 1,000 pieces available for purchase.
Some higher-end models, like the steel Patek Philippe Nautilus 5711A still have good resale value. It listed for US$194,000 in January but has since fallen to US$145,000. But despite the US$49,000 drop, resellers still stand to profit, as the watch originally retails for US$35,000.
The price of an Audemars Piguet Royal Oak also fell by US$20,000, from its March peak of US$75,000. Swiss watches like these models are notoriously difficult to purchase retail, due to long wait lists that can go up to 10 years.
But even with the luxury watch market softening, marketplaces like Chrono24 see an opportunity. Increased supply has lowered prices and removed the barriers to entry in the market, making more watches available. For many watch-lovers, this period represents a good time to invest in heavily ‘grailed’ pieces.
The German-based Chrono, with more than half a million watches listed on its site, experienced a significant increase in overall trading volume during the peak of the crypto crash earlier this year – recording more than a 50 per cent increase year-over-year. “The current price development therefore possibly provides a good opportunity to enter the watch market,” Starcke said. “The general growth in the luxury watch segment is thus unbroken, and Chrono24 expects a further increase in sales in the second half of the year.”
Luxury retail speeds ahead with cryptocurrency
Despite all the volatility surrounding cryptocurrency, many luxury retailers are still choosing to accept it as a form of payment. Luxury watchmakers Tag Heuer, Hublot and Breitling are accepting digital currencies such as Bitcoin and Ethereum for transactions worth US$10,000 and above.
Hublot CEO Ricardo Guadalupe said, “We haven’t noticed a direct repercussion on our sales as a result of the volatility in these markets.” Hublot’s latest offering is the 200-piece Big Bang Unico Essential Grey. The watch, priced at US$20,900, is available only online and can be purchased entirely with cryptocurrency, as Hublot allows payments up to the equivalent of US$30,000.
For Tag Heuer, any payments done with digital tokens will first have the sale price converted into US dollars for the final transactions. The conversion process “acts as a hedge against the extreme volatility in the value of cryptocurrencies” and enables the company to be paid in actual cash at the end of the process. CEO Frédéric Arnault said the brand has already sold a few hundred watches in cryptocurrency.
On the implementation of crypto payments, Arnault explained, “The cryptocurrency payment was a first step in our strategy regarding NFTs and the metaverse. The market will decide which NFT collection or coin will remain in the next five to 10 years and we will continue to invest in crypto, in NFTs and in blockchains, because we believe these technologies are here to stay.”