If there is one thing common between bitcoin (BTC) and luxury goods, it is scarcity. And prices for bitcoin and luxury watches were positive correlated before the spot ETF optimism gripped the crypto market in the second half of 2023.
Much has been written about the relationship between luxury watches and crypto. Prices for both rose during the Covid years as central banks and governments dumped record amount of easy, cheap money into the economy, and crypto traders needed something to buy with their riches.
For most of 2023, prices for luxury watches and the CoinDesk 20, an index of the largest digital assets, moved in parallel. But then the two diverged in the third and fourth quarter of 2023 as excitement around a bitcoin exchange-traded fund (ETF) began to work its way through the crypto market, pushing CoinDesk 20 higher. The U.S. SEC green lighted 11 spot bitcoin ETFs early this month.
Greta Yuan, Head of Research at VDX, a regulated Hong Kong exchange, points to the institutional interest that bitcoin has, thanks to the ETF, – and watches lack – as another reason for the pricing bump.
"Bitcoin is essentially known as digital gold so It’s no surprise that it has held up value better than luxury watches over the past year," she said in an email interview with CoinDesk. "The market has recently bounced back to above 42K, showing strong demand from investors to buy the dip."
Meanwhile, global monetary tightening continued to weigh over prices for luxury watches.
"The decline in prices is partly due to tightening monetary policy and a reduction in speculative trading in luxury assets," wrote Morgan Stanley analysts in a January report about luxury watch prices.
"While prices were relatively stable in 4Q23 and December 2023 (likely influenced by holiday shopping trends), overall market health indicators such as the age of inventory and total supply remain historically elevated," said Watch Charts founder Charles Tian in a note to CoinDesk.
