Independent financial ratings firms Weiss Ratings has just released its cryptocurrency ratings for 74 of the top cryptocurrencies. It is the first time a ratings agency has graded cryptos. As expected, the ratings have turned out to be largely underwhelming.
Just to be clear, Weiss identifies cryptos with ratings of “A” and “B” as good investments. Investors can interpret “A” and “B” grades as being equivalent to a “buy” rating. A “C” grade implies a fair investment and can be construed as being equivalent to a “hold” rating. A “D” rating and anything below that is a “sell” signal.
Here are a few takeaways from the Weiss cryptocurrency ratings report.
- No cryptocurrency scored an A. (No surprises there; Weiss had pre-warned.)
- Ethereum got the best rating at B. (Again, no surprises. Ethereum has a unique moat.)
- Only five cryptos got Bs, two of which are still in their testing phase. (Totally surprised here!)
- Litecoin got a C+. (What?)
- The largest and most popular of all cryptocurrencies, Bitcoin, likewise scored a C+. (Stunned!)
- Bitcoin and Litecoin got beaten by two little-known cryptos, EOS and Steem, which scored B and B-, respectively. (Utterly shocked!)
The man running the show, Martin Weiss, had pre-warned that the ratings would stir a controversy. He made good on that promise. The grades absolutely make no sense.
Just so you know, Weiss says the firm has used computer models to rate the cryptocurrencies on four metrics. Two of these are risk and reward, which define how volatile these cryptos are, and the other two are technology and fundamentals.
Technology determines the status of the crypto’s underlying code and fundamentals analyze attributes like its adoption rate, scalability and transaction fees.
Based on these metrics, it’s hard to fathom how Bitcoin or Litecoin be graded lower than the likes of EOS, Steem, Cardano, and NEO (the only four cryptos to receive a B, other than Ethereum). It just beats me.
Litecoin, for instance, has been much less volatile than these four cryptos. It is more widely recognized, has a much higher adoption rate, and is comparable in terms of technology.
Needless to say, I’m taking these ratings with a grain of salt.
Bear in mind that the results come out on a day when cryptocurrencies are finally trading in the green. I’m almost certain that the ratings would have an effect on prices in the short term. Nervous investors who easily buy fear, uncertainty, and doubt may begin to adjust their holdings following these ratings.
This could be a major misstep. In the long run, fundamentals will beat computer-generated letter grades.
Our belief in Litecoin is unshaken in light of the Weiss ratings. Even if we were to go by Weiss’ rating scale, the letter grade assigned to Litecoin indicates the investment is worth holding. We’re staying true to our original Litecoin price prediction with a $400.00 LTC price target for 2018.