To quote Kanye West “No one man should have all that power”. Recent events suggest that Elon Musk now does have all that power.

The Tesla CEO’s words may for now be the single biggest price determinant of Bitcoin and Dogecoin, with his every word seeming to drive significant volatility in the price of these cryptocurrencies. Doge fell by 30% following his Saturday Night Live appearance where he agreed that the crypto was a ‘hustle’.

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More recently, he has announced that Tesla would stop accepting Bitcoin as payment leading to a 15% downward correction in the price. This came just months after Tesla became the first major company to accept the cryptocurrency and even propping up the firm’s balance sheet with $1.5bn of the stuff, leading to a 20% jump in the price in February.

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 decentralised, he is doing a poor job of selling it. The fact that he can drive such price volatility just through his words should have people worried.

Musk drives crypto volatility

Whether you view cryptos as currencies or assets (this writer’s view is the latter), 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.

I have always viewed the market as irrational and devolved from real world fundamentals, especially over the last 15 months. However, it is rare that an individual can have so much power over prices.

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If this continues, people may lose faith in these cryptocurrencies as all the tracking of price trends may be wiped out by a Tweet from Musk. 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.

Whether Elon is a true believer or just struggling to navigate how to get his views across in a world where people read into every last word he says, it is clear that at present he has too much influence over the price of certain cryptos. This is negative for price stability and will likely hinder to adoption of cryptocurrencies into the mainstream, especially in payments.

This was written by GlobalData Thematic Analyst Danyaal Rashid.