Monday, January 22, 2018

Cryprocurrencies hit the big time as ratings agencies prepare to issue grades on individual cryptos for investors

Perhaps one of the biggest ironies in the financial world occurred when it was discovered back in 2008 that investment banks were actually paying ratings agencies to grade their own securities.  This collusion of course played a part in the Credit Crisis that nearly brought down the entire financial system since the agencies gave high ratings to securities that were worth little more than junk.

So with this historical event in mind from a decade ago, it appears that the hits just keep on coming as ratings agencies prepare to give grades for their next new security in an industry where it is extremely likely they once again have no clue about the assets they intend to rate.

Weiss Ratings, a U.S. independent rating agency, had announced that it will issue letter grades on cryptocurrencies, to be released Wednesday January 24. Beyond market leader bitcoin (BTC), the rating agency will also issue grades for ethereum (ETH), Ripple’s XRP, bitcoin cash (BCH), cardano (ADA), NEM (XEM), litecoin (LTC), stellar (XLM), EOS, IOTA, Dash, NEO, TRON, Monero (XMR), bitcoin gold (BTG) and many others. 
The rating agency, which was founded in 1971, grades about 55,000 institutions and investments including banks, credit union, insurance companies, stocks, ETFs and mutual funds. Unlike Standard & Poor’s, Moody’s, Fitch and A.M. Best, Weiss Ratings prides itself on never accepting compensation of any kind from the entities it rates. 
The new cryptocurrency ratings are a first for any U.S. financial rating agency. They are said to be based on a model that analyzes thousands of data points on each coin’s technology, usage, and trading patterns. Besides enabling cautious investors to better assess the risks associated with an instrument they wish to invest in, ratings also define what trades many fund managers are allowed to take part in. 
“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. - Bitcoin
Judging by the track record of ratings agencies leading up to the Financial Crash, exactly what kind of 'clarity' can these paid regulators provide in a market that is decentralized, unregulated, and completely outside the purview of market control? 


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