Weiss hits back at crypto ratings criticism

Anthony Caruana 6 February 2018 NEWS


Why bitcoin deserves a C+ rating, apparently.

Critics of Weiss' recently-launched rating system for cryptocurrencies have labelled the ratings agency's efforts as having "some screws loose” or "laughable". But it seems the folks at Weiss don't like being criticised.

Weiss has responded with a 14-page report that explains precisely why it gave bitcoin a low C+ rating while grading other, lesser-known coins more highly.

Weiss' new cryptocurrency rating is based on four key components: investment reward, investment risk, fundamentals and technology. One of its principle criticisms of bitcoin is that, while it was the first and remains the most well-known cryptocurrency, it's not as well placed for mainstream life as other coins. In other words, Weiss is separating bitcoin's brand cachet from its value as an investment instrument.

In explaining its C+ rating of bitcoin, Weiss says the currency is being out-performed by altcoins, has a very volatile price, has great security but has a higher cost to deliver that security and is starting to reach some technical limits that impact the coin's performance. And, like all coins, there are regulatory challenges across the world that will impact how cryptocurrencies can be used by consumers and on currency markets.

Perhaps the most telling comment in the report is buried in the last paragraph:

The crypto ecosystem is evolving at a very rapid pace; that older technology will be upgraded or discarded.

While bitcoin opened the door to the cryptocurrency market, its first mover advantage may be eroded by other coins that emerge. We are certainly in the midst of a "land grab" as new ICOs seem to spring up daily. Over time, the number of viable coins on the market will consolidate as various altcoins either merge or disappear. That's something we see in almost every emerging market.

Interestingly, ratings released by the Crypto Collective, while assigning a higher letter grade, ranked some of the most highly traded cryptocurrencies in the same order. Although the Crypto Collective gave bitcoin a B grade, it ranked Ethereum and EOS more highly and Ripple lower. That's the same order as Weiss.

So, while the world learns more about how cryptocurrencies are being traded and the associated risks and opportunities, it's probably wise to look at multiple ratings and to focus more on how the ratings are assigned and comparing the relative order of different rating systems rather than the specific letter grades.

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