Weiss Ratings, an independent American rating agency that covers stocks, mutual funds, banks, insurance, credit unions, ETFs, and banks has stepped out of its comfort zone to present the first-ever rating on cryptocurrencies. Weiss Rating doesn’t have the same level of visibility that other rating agencies such as Standard & Poor’s and Moody’s enjoy; yet, its independence has enabled it build a reputation for reliably objective ratings and insights on Wall Street assets.
Many Wall Street retail and institutional investors have been scared of getting involved with cryptocurrencies because of lack of “credible” analysis, insight, and ratings. Weiss’ bold move to deliver the world’s first ratings on 74 cryptocurrencies in its Weiss Cryptocurrency Ratings will help cryptocurrency traders and investors avoid hype, identify promising assets, and diversify risks across different cryptocurrencies. However, here are three key takeaways from Weiss Cryptocurrency Ratings.
1. No cryptocurrency makes the A+ rating
Traditional financial institutional have always been skeptical the prospects of cryptocurrency especially because of the decentralized nature of cryptocurrencies and the lack of regulatory oversight on the industry. The skepticism of traditional financial institutions is evident in the fact that none of the 74 cryptocurrencies profiled in Weiss’ rating qualifies for the A+ (excellent) rating.
Of course, an objective review of the cryptocurrency industry in relation to Wall Street suggests that the lack of an A+ rated cryptocurrency is deserved. However, the voice of reason suggests that it is not fair to judge cryptocurrencies with the same metrics for stocks because cryptocurrencies and stocks are fundamentally different.
2. Ethereum might be a better cryptocurrency investment than Bitcoin
Bitcoin is the first and most popular cryptocurrency and it has the largest trading price by the virtue of its popularity. Bitcoin currently trades around $11,375, about ten times more than its closest rival Ethereum, which trades around $1,066.46. However, analysts at Weiss believe that Ethereum might be a better cryptocurrency investment than Bitcoin. The analysts have given Ethereum a rating of “B” (good) and EOS joins Ethereum in the B rating category.
Weiss notes that one of the reasons Ethereum got a higher rating than Bitcoin is that the former “benefits from more readily upgradable technology and better speed, despite some bottlenecks” than the later. In all fairness, the median transaction cost on Bitcoin over the last couple of weeks was around $10 whereas Ethereum had a median transaction fee of about $0.85. Hence, the fact that “encountering major network bottlenecks, causing delays and high transactions costs,” might have influenced the rating.
However, the analysts at Weiss ratings have ignored the fact that Bitcoin and Ethereum are fundamentally different coins. While Bitcoin is actually a replacement for money, Ethereum is more of a platform for building apps and smart contract – ETH was never created to replace fiat.
3. The ratings might end up muddling up the market instead of providing clarity.
Wall Street analysts have started lauding the ratings as an important tool that will make it easier for many more Wall Street investors to become involved with cryptocurrencies. For instance, Ari Paul, chief investment officer at BlackTower Capital told CNBC that Weiss’ cryptocurrency ratings are a great example of the ongoing institutionalization of the cryptocurrency industry and a healthy addition.”
However, you can’t help but notice that the cryptocurrency rating from Weiss betrays a misunderstanding of the fundamental factors that make cryptocurrencies different from other types of assets. For instance, Bitcoin was rated a “C+” (fair) investment but Steem, Cardano (ADA), and NEO were rated higher than Bitcoin as they scored a “B-” rating ahead of Bitcoin’s “C+” rating.