The law of demand and supply is one of the oldest laws in business. It helps people know the market conditions and how they might affect prices. The law states that when the demand for a commodity is high and the supply remains constant, the price has to increase. On the other hand, prices have to decrease when the supply is high and the demand remains constant or reduced. The increase and decrease of prices result from demand and supply trying to get to the equilibrium, dictating commodity prices.
In this particular situation, cryptocurrency is the main culprit that caused the shift in prices. Since 2020, people have been making a lot of money from cryptocurrency and other blockchain-involved sources. This had a huge impact on the economy. The increased income resulted in increased spending, mainly on luxury items. From 2020 to the end of 2021, the number of luxury items bought by crypto millionaires increased significantly. This included clothes, shoes, timepieces, or watches. This increased demand in the market, especially the second-hand market for some of the existing big brands.
Cryptocurrency booming the luxury watch market
To some people, buying watches was an investment. They used their earnings to buy something that would hold its value in the future, and they would sell them for a profit. The other group bought the watches to show off their newly found wealth. But each buyer’s reason led to an increase in the volume of trophy watch models sold.
Some models that sold like hotcakes include Rolex Daytona and Philippe Patek Nautilus 5711A. Before the rise of crypto millionaires, the Patek Philippe Nautilus 5711A went for $35000 in the second-hand market. After the demand rose, the price increased significantly to $240000 by the year’s first quarter. But the problem is that the value is decreasing due to cryptocurrency’s situation.
Many people might think the crypto crash only affects the value of crypto and things involved in the market. Still, they forget to consider the changes’ impact on other things that the crypto investors were involved in. After the beginning of the crypto crash, the value of said watches began to drop. This is because crypto investors began to lose money rather than make money.
When this happened, they stopped buying the trophy models, while some began selling some of their watches. This led to a sharp decline in the demand for watches in the market. As a result, the price began to drop steadily to reach equilibrium. So far, the price of Patek Philippe Nautilus 5711A, valued at $240000 in the first quarter, has dropped to $190000. If this continues, the value will most likely go lower. This is one example of how the cryptocurrency crash is affecting other markets. It is causing challenges to crypto investors and other markets that benefited from the rise of cryptocurrency. But according to experts, this is one way the increase in interest rates will continue to affect the market as the interest rates suck the extra cash from the markets to get rid of inflation.