The Lagging Indicator of the Encryption Bull Run: Luxury Goods Consumption

Every prosperous cycle has its unique way of displaying wealth. This display is not limited to on-chain data or wallet screenshots; it extends to luxury consumption in the real world. Many people go from being unknown to spending lavishly on luxury watches in a short period and showing off on social media.

This seemingly trivial phenomenon actually marks an important shift in market psychology. Let's delve into this phenomenon.

Why choose a watch?

Luxury watches are the preferred choice because they are typical Veblen goods. The characteristic of such goods is that the higher the price, the greater the demand, which seems to contradict the basic law of demand.

People buy these kinds of products not out of practicality, but to showcase their social status. For those who have suddenly become wealthy, they are eager to demonstrate their wealth to the world. They are unlikely to choose to buy land or government bonds; instead, they tend to purchase symbols that can visually display wealth, such as watches, luxury cars, and sometimes even digital collectibles.

Characteristics of Lagging Indicators

Observing the watch index and Bitcoin price trends between 2020 and 2024, we find an interesting phenomenon: the prosperity of the watch market is not synchronized with the encryption currency market, but shows a certain lag.

In 2021, when the prices of digital collectibles reached sky-high levels, the watch market truly began to flourish. This round of watch market activity is not the beginning of a bull run in encryption, but rather one of the signals of the market peak.

Data shows that the watch index typically lags behind encryption during an upswing, subsequently peaks slightly later, and ultimately declines almost in sync. Within a year after the collapse of the encryption market, the prices of certain well-known brand watches plummeted by nearly 30%. This is not due to a disappearance of demand, but rather that the core demand driving up prices (status symbol) has already diminished.

This makes the watch an atypical market signal. They cannot reflect the market fundamentals, but they can clearly reflect market sentiment, and their effect is even more intuitive than many traditional indicators.

Alternative Market Sentiment Indicators

Traditional financial markets have volatility indices, and the derivatives market has funding rates, which are all indirect indicators. However, luxury consumption is different; it directly reflects the behavior and emotions of investors, showcasing their perception of their own wealth and their desire for social attention.

When we see the secondary market prices of certain brand watches reaching twice the retail price, or when someone showcases a custom digital collectible watch, it often indicates that the encryption bull run is nearing its peak. At this point, people start to spend their accumulated wealth extravagantly.

Current Market Cycle Analysis

Currently, we are approaching historical highs again, with mainstream cryptocurrency prices generally on the rise. However, the luxury watch market remains relatively calm, with stable prices, and some models even experiencing sluggish sales. Dealers have not reported any significant shortages or premiums.

At first glance, this seems to be a bearish signal, but the reality may be just the opposite. The truth is that the profits accumulated in this cycle have not been widely realized. The recent hot token market has only created a small number of new wealthy individuals, which is not much compared to the previous bull run peak.

It is worth noting that discussions about luxury watches have begun to increase in the crypto community, but the heat is far from that of 2021. Historical experience shows that the shipment volume of famous watches usually increases significantly in the later stages of a bull run, especially after cryptocurrencies set new historical highs again, because at that time people generally feel that they have become wealthy.

Historical Rhythm and Current Trends

In recent months, the price of Bitcoin and watches has begun to show a certain degree of correlation. Although the trends are not completely consistent, the correlation has become evident enough.

However, unlike the situation in 2021, this time the watch and Bitcoin started to rise almost simultaneously. Since March of this year, the trends of both have been largely synchronized. But upon closer inspection, we can find some subtle differences.

In-depth Observation of Market Trends

Despite Bitcoin nearing its all-time high, the prices of luxury watches have not kept pace. The price indices of most watch brands remain well below the peaks of 2022, with an overall downward trend in the market. Aside from a few top-tier brands, the secondary market prices of many well-known brands have dropped by 30%-40% compared to retail prices.

This phenomenon reveals two important pieces of information: first, the market has not yet entered a bull run; second, most luxury watches are still not ideal investment choices. Their original design intention is not to maintain value, but to convey a sense of value.

It is important to note that the increase in watch prices does not mean we are at the top of the market, but it does indicate that we have entered the mid-stage of a bull run. Typically, people are willing to make symbolic purchases only after going through difficult times, which often occurs around two-thirds into the bull run cycle.

Currently, wealth is accumulating, and market confidence is recovering, but the real luxury consumption boom has not yet fully erupted. When the moment of "wealth-driven consumption" truly arrives, we can clearly feel the changes in the market without looking at any charts or indicators.