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Guide to the Weiss Cryptocurrency Ratings: Useful or Flawed?

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Cryptocurrencies have ben growing as an investment option for several individuals and for institutional investors. Most of them have been building their own perceptions about what to take into account when investing in cryptocurrencies. But there was not a consensus and investors did not have a clear idea about which cryptocurrencies had the best possibilities to succeed as the market is so crowded and a lot of mis-information and FUD appears online.

Weiss Cryptocurrency Ratings

This is where Weiss Cryptocurrency Ratings come in. Founded in 1971, they are a well-respected provider of traditional investment ratings who have been advising people for years on stocks and shares investments. With the explosive growth of cryptocurrencies, they decided to enter the crypto market and produce a similar report for the most popular cryptocurrencies in the market.

As always, we are skeptical when traditional companies try to take on the crypto-world, so let’s take a look in more detail at their report.

Weiss Cryptocurrency Ratings

The main intention behind Weiss Cryptocurrency Ratings is to give clarity to the unregulated and lax cryptocurrency market by providing robust and impartial ratings. The company explains that they are the first financial rating agency that will evaluate cryptocurrencies and benefit investors with better information.

A statement released by the Weiss Cryptocurrency Ratings reads as follows:

“We’re proud to be the first financial rating agency to bring that benefit to investors – to help avoid the hype, while identifying the few solid and promising cryptocurrencies that truly merit their hard-earned cash.”

Weiss Ratings Explained

The official release was on January the 24th and 74 cryptocurrencies were evaluated. Bitcoin, the most famous cryptocurrency, received a C+ rating due to the scalability problems that the virtual currency is facing. Clearly, the rating can change as soon as the Lightning Network is released. Besides that, if Segregated Witness (SegWit) is being adopted by the most important crypto platforms in the market, Bitcoin rating may improve.

To have a clear overview about the rating, the official website of Weiss Ratings explains that investors should interpret the Weiss Cryptocurrency grade scale with these terms:

  • A = excellent
  • B = good
  • C = fair
  • D = weak
  • E = very weak

Mr Martin D. Weiss, Weiss Ratings founder, explained during an interview on CNBC that the agency uses a computer model to rate the cryptocurrencies. The computer program uses four different metrics: risks, reward, technology, and fundamental aspects of adoption and security.

“You can have a great technology index – all the pieces are in place for a very nice, strong currency,” he commented. “But unless it’s actually reality-tested in the marketplace, it may not succeed, and that’s what this last, fourth index tests.”

Weiss Ratings January and February 2018

Most of the cryptocurrency ratings have been between C- and C+, to be more precise, 54 cryptocurrencies were located in the C range. 15 were evaluated among the D range. There were only 5 virtual currencies in the B range and no A or E at all. Ethereum, Steem, Cardano, EOS and NEO where the only cryptocurrencies displaying a green badge between B- and B.

Strangely, Cardano – a crypto project with no working product, as yet, scored higher than Bitcoin, the original cryptocurrency with a working product used by millions around the world.

Weiss Report

Weiss Ratings Report, Download full report here (PDF)

As it was the first cryptocurrency rating, most of the cryptocurrencies were evaluated very carefully. There was no clear winner or loser, just some D and B contrasting with the C scale.

The second edition of the rating that was released on February the 23rd, the situation was different. The panorama was another one. The company released some E and A for the first time and increased the amount of B and D. The table finished in this way: 49 C, 13 D, 8 B, 7 E and 1 A.

NEO and Bitcoin Controversy

Clearly, the ratings may benefit some cryptocurrencies and investors while harm other projects. This is what happened with NEO and Bitcoin.

The only cryptocurrency with an A rating was NEO, also known as the Ethereum of China. NEO is a platform that allows ICOs and smart contracts. At the moment of writing, this cryptocurrency is the 7th most important by market capitalization with $7.74 million dollars and a price per currency of $119.02, according to Coinmarketcap.

As NEO has received the first A rating, the company explained that their ratings are based on analysis and mathematical models. The intention was released after receiving some negative comments from the Bitcoin community.

Bitcoin.com wrote:

“Granting NEO an A confirms, in the eyes of critics, that Weiss – a company with no background in cryptocurrency – doesn’t understand the industry it is judging. What sort of skewed ratings system places on of the world’s most centralized cryptocurrencies leagues ahead of one of the most decentralized (bitcoin)?”

Bitcoin received, in February, the same punctuation as in January, a C+, even after recovering 5 percent points of the market share. Bitcoin dominance was 34% on January the 23rd/24th and reached 39% a month later.

Bitcoin is the most important cryptocurrency as of today, with a total market capitalization of over $200 billion dollars and a price per bitcoin of $11,550 dollars.

Some experts in the matter agree with the Bitcoin stance towards NEO. They claim that NEO is a centralized network compared to Bitcoin. Apparently, decentralization in Weiss Ratings does not play an important role as other factors described before.

Eric Wall, writer at Bitcoin.com explained that NEO uses a delegated Byzantine fault tolerant consensus algorithm, in which NEO holders select some nodes to be in charge of the consensus process. What calls the attention is that NEO has currently just 7 active nodes that are run by the NEO foundation.

In his Twitter account, Eric Wall wrote:

“So what does NEO use? Supposedly, NEO uses a delegated Byzantine fault tolerant consensus algorithm. This means that NEO holders elect a set of nodes to be in charge of the consensus process. Currently that’s just 7 (!) nodes run by the NEO Foundation, essentially like Ripple.”

GameCredits, another cryptocurrency with a D+ in both Weiss Ratings releases has shocked the team behind this virtual currency. GameCredits has a team of over 100 members that work regularly on the project, and has established several partnerships with companies such as Unity.

The ratings did not affect in a negative way GameCredit’s price. Indeed, after the first release, the cryptocurrency appreciated 20% in the next days.

Conclusion

Founded in 1971, Weiss Ratings is helping institutional investors to analyze the cryptocurrency market in a more technical way. The two times that the rating was released, the cryptocurrency market didn’t seem to react in any particular way. The impact that this rating may have over the market seems limited.

With growing interest in Cryptocurrency around the world and more institutions regulating cryptocurrencies, it is important to have a rating agency that evaluates the most important cryptocurrencies.  In the future other important institutions may start to release their own ratings, creating a similar system to the one that exist nowadays in the stock market.

Finally, when the ratings have been operating for a longer period of time, better conclusions and analysis will be available. Investors will compare long time performances and have a look at which events had the biggest impact in the markets and the ratings of the cryptocurrencies.




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I have a Bachelor’s Degree in International Relations and I write about Cryptocurrencies and European Politics. I live between Buenos Aires and Wroclaw.

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