Crypto Ratings are In, and They’re Not Pretty
The first-ever public ratings of cryptocurrencies were published this week, and the results don’t look good. Weiss Ratings, a Florida-based credit rating service, judged digital assets rather harshly on the basis of tight industry bottlenecks and processing delays.
Ethereum Better than Bitcoin
One of the most notable, albeit contentious, conclusions drawn from the Weiss report was Ethereum’s superiority over bitcoin. The ether blockchain received a B rating to bitcoin’s C+ because it “benefits from more readily upgradable technology and better speed, despite some bottlenecks.”
A total of 74 cryptocurrencies were reviewed and rated, with none receiving the top “A” rating. In fact, Ethereum and EOS were he only coins to crack the “B” scale.
Bitcoin was judged “fair” because the cryptocurrency is “encountering major network bottlenecks, causing delays and high transactions costs,” Weiss said in a release. “Despite intense ongoing efforts that are achieving some initial success, Bitcoin has no immediate mechanism for promptly upgrading its software code.”
Ratings founder Martin D. Weiss told CNBC that the company based the ratings on four key metrics: risk, reward, technology and fundamental factors related to security and adoption.
Weiss has been in operation for the past 47 years, but normally flies under the radar of the better-known rating agencies like Standard & Poor’s and Moody’s.
Traders didn’t take too kindly to the Weiss report, with hackers immediately infiltrating the company’s website. The company spent the better part of Wednesday dealing with denial-of-service (DOS) attacks it said emanated from Korea. Weiss then took to Twitter to warn about fake reviews published in its name.
In a Wednesday tweet, the company said: “Urgent consumer alert: Beware of fake cryptocurrency ratings posted on Twitter accounts and the Internet. The only true Weiss Cryptocurrency Ratings are at http://www.weisscryptocurrencyratings.com”.
Traders are likely concerned that negative ratings could adversely affect cryptocurrency prices, which have experienced multiple selloffs this month over concerns of heightened regulations.
Despite the negative ratings, the Weiss report further highlights the growing institutionalization of cryptocurrency. The arrival of bitcoin futures and integration of derivatives trading technology ae all helping to bring cryptocurrencies to the mainstream. On balance, the Weiss ratings could be a net positive for an industry still finding its footing.
The global cryptocurrency market peaked at $574 billion on Thursday, according to CoinMarketCap.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.