Cryptocurrency To Be Graded By Ratings Agency?
Is cryptocurrency going to start getting rated like major institutions and investments such as banks, credit unions, insurance companies, stocks, bonds, ETFs and mutual funds? According to recent news, the answer is a resounding yes - and the charge is being led by long established ratings agency Weiss - known for not accepting any compensation from the entities that they rate.
What happens Next?
What can we expect from something like this? - especially if other agencies such as Standard & Poor or Moody's start to rate them? Such a move could prove to be a double edged sword. The first thing I thin that everyone will point to is the opportunity to really bring a spot light to cryptocurrency and bring it t a more mainstream audience - creating more demand and increasing the market cap. Also - ratings, especially positive ones - could be just the incentive needed by investors either on the fence or who thought bitcoin and other cryptos were nothing but a scam. It could bring an air of legitimacy to the industry of digital currency because if major financial companies are paying attention to them and giving them ratings then they must be for real, right?
Making the Grade
Just one crypto getting a high grade is good for ALL of them ultimately. However, one thing that comes to mind is that it may have an effect on the movement of the markets in the wrong direction- for example- we might see money start flow out of a coin that didn't get a high rating. Getting graded also means that grades and ratings can change. We might see a coin drop a grade and suddenly the market panics and starts selling off. If people don't understand why there is a selloff - it could get contagious and other coins may start to slide.
“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.”
If they can provide some guidance to the market and help people to make sense out of all the different coins, then ultimately, I think in the end it will be a good thing for cryptocurrency in general. It may even allow larger hedge funds to purchase coins rated AAA and bring a larger pool of investment dollars to the table.
What do think abut coins getting rated? and should they be covered by all the major ratings agencies?
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