The high-end watch market has recently experienced an unprecedented speculative frenzy, where iconic models saw their prices skyrocket before undergoing a sharp correction. From the influence of cryptocurrencies and the hype generated by social media to the artificial scarcity maintained by brands, this bubble has highlighted the evolving dynamics of an increasingly globalized and speculative market.
As the market now stabilizes, it is crucial to analyze the mechanisms that fueled this overheating and draw lessons for the future.
A New Phenomenon: When Watchmaking Becomes a Speculative Asset
Traditionally, the world of high-end watchmaking was driven by passionate collectors and connoisseurs who valued heritage, craftsmanship, and exclusivity. However, between 2020 and 2022, a fundamental shift occurred—certain watches transformed into financial instruments, fueling an unprecedented wave of speculation.
Several factors contributed to this meteoric rise in prices:
- The cryptocurrency boom: The surge of Bitcoin and Ethereum between 2020 and 2021 generated sudden and massive wealth, attracting a new wave of buyers. Many crypto traders and investors sought to convert their gains into tangible assets, and luxury watches emerged as an accessible and prestigious option. The Patek Philippe Nautilus 5711 and Rolex Daytona became must-have symbols among this new digital elite.
- The impact of social media and digital influence: Platforms like Instagram, TikTok, and YouTube accelerated the popularity of certain models, turning them into cultural icons within months. Influencers, athletes, and tech entrepreneurs contributed to this massive exposure, fueling a sense of rarity and desirability that further boosted demand.
- Brand-driven scarcity: Watchmaking powerhouses such as Rolex, Audemars Piguet, and Patek Philippe intentionally maintained limited production to enhance the exclusivity of their flagship models. This artificial shortage not only drove price surges on the secondary market but also reinforced the perception of these watches as solid financial investments.
- Post-COVID liquidity influx: The ultra-accommodative monetary policies adopted in response to the pandemic created an environment conducive to alternative investments. With historically low interest rates and abundant liquidity, investors sought to park their wealth in tangible, rare assets, fueling the luxury watch market’s speculative boom.
The combination of these factors led to an unprecedented price explosion. Models such as the Patek Philippe Nautilus 5711 and Audemars Piguet Royal Oak saw their values triple or even quadruple within months on the secondary market.
The Bubble Bursts: A Harsh Return to Reality
Every speculative frenzy eventually faces a correction. By late 2022, several signs indicated a market shift in the luxury watch industry:
The crypto collapse and the FTX scandal: The downfall of Bitcoin and other digital assets triggered the end of the Web3 millionaire era. Many investors in the crypto space had to liquidate their assets, including their watch collections, flooding the market with pieces that had been in high demand just months earlier.
Rising interest rates and the end of easy money: Faced with soaring inflation, central banks tightened their monetary policies. This shift reduced speculative investments and dried up demand for the most sought-after watches.
A change in collector sentiment: As prices became increasingly volatile, many buyers adopted a wait-and-see approach instead of rushing into overpriced models. This cautious behavior intensified price declines on the secondary market, creating a downward spiral for certain references.
The consequences were immediate: some of the most hyped models lost up to 50% of their speculative value within a year. The Nautilus 5711, which had reached over €250,000 at the height of the bubble, dropped below €100,000. Similarly, the stainless steel Rolex Daytona saw its price fall by nearly 40% in the gray market.
The Current Market: Toward a New Balance?
Following this period of volatility, the luxury watch market seems to be entering a phase of stabilization. Several key trends define this new era:
A return to watchmaking fundamentals: Buyers are now favoring models whose value is rooted in craftsmanship and innovation rather than fleeting hype. Independent brands and haute horology complications are gaining renewed interest.
Price normalization: While some references continue to sell above their retail price, the gap with the secondary market is narrowing, leading to more rational acquisitions.
A shift in buyer demographics: High-end watchmaking is once again attracting true collectors and passionate enthusiasts rather than short-term speculators looking for quick returns.
Lessons from This Speculative Bubble
This period of euphoria followed by a sharp correction provides valuable insights into the luxury watch market:
Watches should not be viewed as short-term investments: While certain references may retain their value, the volatility seen in recent years highlights the risks of short-term speculation.
Bubbles are fueled by external factors: The cryptocurrency explosion played a crucial role in overheating the market. Once these funds disappeared, the watch industry immediately felt the impact.
The market self-regulates: Even though brands maintain artificial scarcity, supply and demand inevitably find a new equilibrium over time.
Conclusion: A More Stable and Rational Market?
While the speculative frenzy of 2020-2022 appears to be over, it has profoundly reshaped the landscape of high-end watchmaking. Far from being a fleeting episode, this bubble demonstrated the increasing role of luxury watches in alternative investment strategies, while also reminding us that an irrational market always corrects itself.
Today, the market is more balanced, refocused on its core values, and less vulnerable to extreme fluctuations. High-end watchmaking is thus rediscovering its true essence: that of a timeless mechanical art, designed to transcend economic cycles and endure for generations.
Article written by Chris Samassa, Founder of Osterman Watch
