Weiss Ratings Gives Grades to Cryptocurrencies
Weiss Ratings, LLC, an independent, 47-year old securities ratings company, has become the first organization to give grades to bitcoin and other cryptocurrencies. Bitcoin was given a rating of C+ while the EOS platform and Ethereum received a B rating. According to the rating firm, bitcoin received a lower grade because of its relatively higher transaction costs and longer times to process transactions. The company stated that it was aware of the fact that bitcoin’s developers were trying to solve these issues. However, these ratings seem to be based on the current usability of cryptocurrencies.
Although none of the 74 coins covered were assigned an A rating, Ethereum and EOS stood out from the rest of the crypto-platforms by being the only two cryptos to get a B rating. The main reason for Ethereum’s fairly high rating was that its platform was able to handle upgrades a lot better than other cryptos. Cardano (ADA), Dan Larimer’s Steem, and NEO received a rating of B-.
Historically, these grades seem to be consistent with the company’s rating system. For example, the agency is known to not give A ratings, or high ratings in general, when it came to traditional stocks or mutual funds (back in the 1990s and early 2000s).
Low Rating for Ripple & Weiss Hacked
Surprisingly, Ripple’s XRP received only a C rating from Weiss. As most crypto watchers are aware, Ripple’s platform has managed to gain the interest of the world’s leading banks, especially the ones operating in Japan and South Korea. It is also among the top 3 cryptocurrencies in terms of market capitalization (CryptoCompare). At this time, it is not clear how Weiss issued this rating because there’s not enough detailed information available about its grading criteria.
Before the securities rater announced its ratings, cryptocurrency investors were quite concerned. They were afraid that their cryptos might get a low rating, which could potentially hurt their business. The fear of negative ratings probably led to a series of denial-of-service attacks from South Korea. Crypto investors, mainly from S. Korea, also tried to initiate an effort to shut down Weiss’ rating website. Apparently, a few hackers were successful in breaking into the company’s website.
Social Media Used to Spread Fake Ratings
After breaking in, the hackers began to steal information from the website. They then altered this information, probably in a way that would suit their own agenda, according to Weiss. The company tweeted out: “Urgent consumer alert: Beware of fake cryptocurrency ratings posted on Twitter accounts and the Internet”. The long-time securities ratings firm’s founder, Martin D. Weiss, said that he was well aware of the fearful commentary circulating on social media. He stated, “So this may be an attempt to thwart our release today”.
Ari Paul, co-founder and chief information officer at BlockTower Capital, a crypto investment company, thinks that the development of a rating system for crypto-platforms indicates a movement towards their institutionalization. Mr. Paul believes that this is a good thing by calling it a “healthy addition”. However, he did criticize the rating company for “misunderstanding” the real value and purpose of cryptocurrencies. He feels that the rating system did not give enough consideration to a crypto’s “protocol stability, security, and decentralization”.
Although a rating system for cryptos might sound like a good idea, it does seem to be biased. Notably, Weiss assigned a low C rating to Ripple. This might be due to the fact that it’s centralized. Whatever the real reason might be, companies giving ratings to cryptocurrencies could potentially lead to unfair discrimination. Therefore, ratings for cryptocurrencies by an independent entity should not be relied upon to make investment decisions, or any other kind of decision when it comes to cryptos. It would be better if people performed their own research and tried to learn from their own experiences.