Cryptocurrencies recently drew a lot of attention due to Elon Musk personally investing heavily, while having Tesla also invest. Subsequently some CEOs (mostly of tech companies) began saying companies should hold cryptocurrencies instead of dollars, euros or other government backed currencies. Thus, the price of the major ones, like Bitcoin, skyrocketed.
However, there is good reason for wild volatility in cryptocurrency values. This podcast describes the breadth of cryptocurrencies, the foundation upon which they claim to have value, as well as how they are stored, traded and spent, explaining how weak the infrastructure really is. It also explains the difference between cryptocurrency, which is a fad, and the underlying blockchain technology - which is an emerging trend.
It is possible that cryptocurrencies in the future could be government backed and regulated - but that is not the case today. Today there is a lot of speculation in cryptocurrencies, but little value. Like the tulip bulb mania (where the price of one bulb was greater than the price of a house) crypto buyers are buying and selling on the “greater fool” theory that whatever they pay, a greater fool will come along and pay more. Even though they’ve been around for 16 years, today’s cryptos demonstrate just how big and long-lived fads can be – even when they show no signs of ever becoming a real trend.
Unless governments get involved in producing and using cryptocurrencies instead of traditional currency. That could happen, and it would be a trigger that would turn the fad into a trend.
- Do you build your plans based on trends – or fads? Do you know the difference?
- Do you know the triggers that could turn a fad into a trend in your market?
- Do you let “momentum indicators” drive your planning, jerking you from fad to fad, instead of using trends to guide long-term planning that will yield success?