Elon has too much power over the price of cryptos, says GlobalData

Following last week’s news that Tesla will stop accepting Bitcoin payments, and with rumours that Elon Musk plans to sell Tesla’s Bitcoin;

Danyaal Rashid, Thematic Analyst at GlobalData, a leading data and analytics company, offers his view:

“Musk’s flip-flopping makes for good entertainment and a great bit of news, but its consequences are much more real. For a man who truly believes in the future of currencies being digital and decentralized, he is doing a poor job of selling it. The fact that he can drive such price volatility just though his words should have people worried.

“Whatever Elon’s view on crypto, it is clear that, at present, he has too much influence over prices. One centralized figure exercising so much control completely contrives the idea of ‘decentralized finance’. This is negative for price stability and will likely hinder adoption of cryptocurrencies into the mainstream, especially in payments.

“Whether you view cryptos as currencies or assets, some sort of price stability is necessary. Every asset will have a certain level of volatility, though one would hope that these price swings are in some way related to fundamentals or real-world events.

“Even if you think that the market is irrational and devolved from real-world fundamentals, as the last 15 months has proved, it is rare that an individual can have so much power over prices. If this continues, people may lose faith in these cryptocurrencies as one Tweet from Musk can radically change the price – quashing any idea that there are any real fundamentals at play. This goes to the heart of the problem: for cryptocurrencies to become widespread and embedded, some stability is necessary. This is certainly the case if people expect to make payments with crypto. If we anticipate week-on-week price swings of up to 20%, payments become infeasible.”

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