Will Rating Cryptocurrencies Help Traders?
The volatile and highly controversial cryptocurrency markets will reach a new milestone today with a ratings system. Weiss Ratings, a U.S. independent rating agency, is attempting to pump analytical blood into the wild Bitcoin ride by launching the first such rating system. The move signals a more formalized toolkit for Wall Street’s institutional investors who are looking for traditional markers and signs of health in order to make sharp investment decisions.
The letter grades will apply to hot cryptos such as Bitcoin, Ethereum, Ripple, Bitcoin Cash, Cardano, NEM, Litecoin, Stellar, EOS, IOTA, Dash, NEO, Monero and Bitcoin Gold. Many others will also be rated.
“Many cryptocurrencies are murky, overhyped and vulnerable to crashes. The market desperately needs the clarity that only robust, impartial ratings can provide,” said Weiss Ratings founder, Martin D. Weiss, PhD. “We’re proud to be the first to bring that benefit to investors – to help them cut through the hype and identify the few truly solid cryptocurrencies. Our ratings are based on hard data and objective analysis. But they’re bound to create controversy, including some grades that may come as a surprise to some people.”
Ratings systems are notorious for being sullied by pay-offs. Moody’s reached a settlement last year for its part in the subprime mortgage loan scandal. The New York Times reported, “Moody’s Corp. has agreed to pay nearly $864 million to settle federal and state claims it gave inflated ratings to risky mortgage investments in the years leading up to the financial crisis.”
In the aftermath of the 2008 financial crisis, Reuters reported, “Credit rating firm Standard & Poor’s will pay $1.5 billion to resolve a collection of lawsuits over its ratings on mortgage securities that soured in the run-up to the 2008 financial crisis, concluding one of the U.S. government’s most ambitious cases tied to the housing collapse.”
Weiss Ratings notes that it operates without accepting compensation of any kind.
The question, however, is whether or not traditional criteria for ratings pertain to cryptocurrencies. And will the new ratings system persuade investors to ditch their own due diligence?
To make sure cryptocurrencies have a pulse, refer to the Crypto Coin Index for links to white papers, activity on Github, roadmap milestones on websites, Twitter announcements, Reddit communities and media feedback.