The lowest priced, stainless-steel version of the Cosmograph Daytona, the Rolex model made famous by Paul Newman, has a suggested retail price of $14,550. But you’re unlikely to snag one that’s so cheap.
Demand for luxury mechanical wristwatches has far exceeded supply over the past few years, and the waiting list for the most popular Rolex models – if you can first convince an authorized dealer that you qualify for one – is now said to be several years’ time. Is. According to Watchcharts, a price database for watch collectors, a current model Daytona sells for over $40,000 in the secondary market; Over the past five years, Daytona’s aftermarket value has increased an average of 20% annually, making it a better investment than the S&P 500 over the same period.
It’s not just the prices of high-end watches that went up during the pandemic. For a wide range of collectibles – among them fine art, classic cars, luxury handbags, sneakers, comic books and trading cards – in the past few years there were bubbles compared to a bottle of Dom Pérignon (whose prices even for some vintage have increased). Then there’s the market for homes, a more practical rarity, where prices have also reached unbearable new highs in recent years.
I’ve been thinking about these asset bubbles a lot lately, especially as I’ve been following the crashes of Bitcoin, Ethereum, NFTs, and the larger cryptocurrency industry that got so heated during the pandemic. Proponents of DeFi – crypto jargon for “decentralized finance”, which essentially attempts to replicate the financial services industry with crypto-based systems – argue that the technology will expand access to financial products and create a wave of innovation. will uncover what is now disrupted by the traditional overlords. Finance, which they call TradeFi.
But it’s becoming increasingly clear that crypto is just another collectible pumped out by the same forces that are fueling the market for Yeezies and Birkin bags – a lot of money around the world, too many obvious to put it. There are no places, and there is a fear of missing out on something that everyone else thought would be hot.
Just as a Rolex doesn’t tell the time better than a regular wristwatch—in fact, electronic watches are far more accurate than mechanical watches—it seems that the Defy does nothing better than the TradeFi, and in many practical ways it does. is worse. As a group of computer scientists and other tech experts recently wrote in an open letter to Congress, “By its very design, blockchain technology serves every purpose currently touted as a current or potential source of public benefit. is poorly suited for.”
So why invest so many? Because FOMO is one hell of a drug. Because when prices are soaring and you feel a fear of losing out, you can talk to yourself about the intrinsic value in anything you can imagine: a mechanical wristwatch is a marvel of miniature engineering, almost in its sheer complexity. is a piece of art. Or: An algorithmic stablecoin is a marvel of fintech engineering, a way to mimic old-fashioned banks and payment networks on the blockchain to create an open financial infrastructure.
Who’s waiting? No, I don’t know what that means – but look how cool it is! And, more important, see how well other people take it!
The wrinkle in my analogy, of course, is that the kind of hotshot that might drop 40 grand on a roly, if the Daytonas suddenly uncoiled, it wouldn’t feel much of a hit. (In fact, the resale prices of Rolex and other luxury wristwatches have declined over the past few months. The sneaker resale market is also softening.)
Crypto, on the other hand, was made to stand for rich and poor for all. On social media, on financial TV networks, and on celeb-studded Super Bowl commercials, these complex, volatile, crash-prone, unregulated financial products were sold to the general public because they couldn’t miss the opportunity. “Fortune favors the brave,” promised Matt Damon, while Larry David starred in an ad whose tagline explicitly invoked FOMO: “Don’t miss the crypto.”
Crypto was also the latest in a series of volatile asset bubbles that rocked American life over the past two decades. At the turn of the century, people were trying to make this big investment in the money-losing dot-com. The mid to late 2000s was dominated by the housing boom that led to the Great Recession. And since 2010, we’ve had a series of boom-and-bust cycles in crypto; Prior to this latest run-up, bitcoin rose and fell in 2011, then from 2013 to 2015, and again from 2017 to 2018.
I’ve seen a lot of Schadenfreude online lately – a lot of people who sat out of the crypto boom making fun of them all, which is probably only fair after years of “having fun living poor” skeptics by the Crypto Brothers. Is.
But can you blame them? Surveys show that people under 40 are more willing than older people to put their money into crypto. This makes sense when you consider that most of their adult lives have been dominated by these boom-bust cycles and that there has been a steady low growth in real wages.
For millions, crypto, such as real estate and the dot-com before it, offered a way out of a dead-end economy. They were trying to move forward with only one way these days: put their money in something hot and hope it gets bigger. This is the American way.