Wondering about cryptocurrency ratings? Well, the volatility of cryptocurrency markets has stumped even the best analysts, so cryptocurrency ratings have been a difficult venture for even the best of us. However, cryptocurrency ratings are in high demand. To meet that demand, there are efforts to bring some science and methodology to the cryptocurrency ratings madness.
Florida-based firm Weiss Ratings released a ratings assessment of cryptocurrencies, assigning letter grades to them. Bitcoin received a C+ grade and Ethereum, the second most valuable cryptocurrency, received a B. According to the firm, bitcoin has excellent security and “widespread adoption.”
It did not make clear whether that adoption related to bitcoin’s use as an investment vehicle or as a medium of exchange. Industry data indicates that bitcoin is struggling to gain traction as a medium of exchange. According to the company’s press release, none of the cryptocurrencies listed in the markets obtained an A grade. That is understandable, given the market’s nascent nature.
In an interview with Marketplace, Martin Weiss, the president of Weiss Ratings, said his firm had used “thousands of data points” and four factors to determine the ratings. The first two are risk and reward indices, which are based on price risk and profit potential.
Key cryptocurrency ratings include bitcoin, litecoin, bitcoin cash, cardano, ethereum Tron, IOTA, and ripple, among many others.
Then, there is the technology index, presumably an assessment of a coin’s underlying blockchain and its future potential. Finally, the firm also uses a “reality test” of the technology’s applications in the real world “to make sure that people are actually using it and it really works,” said Weiss.
Admittedly, that’s a pretty broad set of criteria, and most of it fails to provide clarity. This is especially important as the jury is still out on factors driving price movement in cryptocurrencies. Just yesterday, the Outline published an article detailing a pump-and-dump scheme on a messaging platform.
Also, the “reality test” of the technology’s applications will take a long time to assess, considering the industry’s nascent nature. And it is unclear how the firm will handle technology prospects for offshoots or forks, which essentially use the same blockchain as their parent currency.
Others in the industry also have questions. “It’s odd that Weiss is touting the fact that they don’t take compensation for their services,” says Jay Blaskey, digital currency specialist at BitIRA, adding that it may not be as applicable for cryptocurrencies as it is for credit rating agencies.
Still, it is a start. According to Blaskey, the ratings are a sign of continued maturation for cryptocurrency markets. “I expect this to be the first of many more systems to come, especially as more and more participants in the financial ecosystem integrate these assets into their business models,” he said
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