To be honest I think its wrong to just give all the blame to any single factor like ADs/GreyDealers/Rolex/etc.
Especially Grey dealers and AD's selling to them preferably are, in my opinion just symptoms, but not the reason for all of this
I think its just a combination of factors that kinda amplify each other to the point where we are today:
Reps have gotten really good in the last years.
Like, compare "the best" reps from a few years ago with what we got now. Passing of high tier reps or especially frank ens in sales on eBay, Craigslist, whatever, got easier and easier over time. Most Rolex owners wouldn't be able to tell the difference because, lets be honest, they don't care. We're a forum of nitpicking watch nerds that realize details on a microscopic level which no gen owner would ever mind (just look at the reasons people RL QCs sometimes). You simply can't expect people to be that knowledgeable about stuff. Combine this with people that even fall for DHGate shitters and you'll see that there is a serious pull away from large parts of the second hand market and a push towards TDs and the likes of Chrono24 (due to its insurance) because of the rep market.
Economic Boom = Economic Downturn. It doesn't matter
Watch Buyers are not a uniform Group of people with the same motives. I think I won't have to explain why an economic boom since ~2010 would increase sales of luxury articles.
But one might think that, especially with the coronavirus and other reasons for an economic downturn, these would hinder watch sales but actually there are some pretty good reasons to put your money into watches in those times of uncertainty (btw. 'rona made most really rich people even richer but not going into that here). If you don't trust the economy, if you don't trust banks, if you don't trust governments or your currency as states made the money printers go brrrrr, people tend to go into stuff like gold to store their wealth. Watches mostly share the same properties plus a few extras. They are small, can be carried with you at all times, are relatively easy to sell and are a well accepted product (for sale). Think about it, if shit hits the fan and you have to leave your company/city/country/continent, a watch can be a good way to always have a "I can start over new somewhere else"-capital at your disposal.
Increasing restrictions on cash (heavily depends on your country)
Especially in some European countries and generally in lots of places in the world cash is getting more and more restricted. With more and more restrictions laundering money and tax evasion gets harder and harder (at least for regular people/lower-mid tier criminals - contrary to especially big companies which have way easier methods). Buying watches with this "dirty" money is a viable option in lots of places. Once again, it's a proper store of value, it's small, it's easy to sell if needed and most of all its easy to hide if needed.
Increasing demand causes increasing prices which cause increasing demand.
For a long time (rolex) watches where really not that much of an "investment". Besides some legends and vintage classics prices did actually depreciate over time and not like now increase.
More and more people just try to get rolexes to make money on them because the increasing scarcity means that if you are one of the lucky guys that gets MSRP from ADs you will (at least in the short term) make money on that purchase. Heck some Gen owners I know made thousands and thousands just "flipping" watches. I got a whole circle of friends/acquaintances that only buy from one share friend as he has the best AD connections because he was always a good customer. This causes them to get gens quicker but also makes that one guy kinda have a monopoly on buying with the AD whith wasn't even his intention. But he would be stupid to not embrace the status he has now and make some money of this crazy market.
Increased demand did not always encounter increased production.
This is only somewhat true and depends on your country but let's be honest. Compare how many watches ADs had just a few years back for showcasing and which models they had.
I really think most ADs also don't like that they simply can't put lots of nice models (or even any for smaller ones) to display. Due to lots of factors, the demand grew and grew and Rolex won't give them more watches despite this, because there's a very fine line for rolex to balance between fulfilling the demand but also not loosing its "scarcity" as this is pretty much a fundamental property why luxury items are expensive. Like hinted before having a limited supply also amplifies the fact that only "well-established" customers receive watches. Just think in the perspective of the AD: you got a limited supply from the factory, do you sell (or better said cater) to the guy that already buys 10-20 models a year from you or do you try to satisfy every new customer that might not even come back after his first watch?
Combine this with loads of other factors (like social media making it easier and easier to flex your wealth and the clout and social status that comes with it - but also increasing the propability of getting called out with a fakes) and you got yourself an ever-increasing black hole (or maybe bubble?) that drives up prices more and more.
