Weiss Crypto Ratings, a division of the independent financial ratings agency Weiss Ratings, has made a few changes to its rating methodology to punish copy-cat cryptocurrencies and reward adoption.
Weiss Crypto Ratings is adjusting its methodology to better focus on factors that drive success and to adapt to the changing cryptocurrency space.
When the division was launched in January of 2018 initial coin offerings (ICOs) were still a hot trend, promising investors innovative technology and new crypto use-cases. The market was close to its all-time high with total capitalization standing at around $800 billion, before a year-long bear market struck.
Weiss Crypto Ratings notes it’s aware of the changes in the crypto world, and even though it recognizes “important innovation continues, the power of technology alone to make a critical difference has diminished.” As a result, its model is getting tweaked.
The firm’s Technology Model will now penalize more copy-cat projects, as developers are able to “copy-and-paste old code, make minor tweaks and then tout those tweaks as “revolutionary.” The model also changed to differentiate between cryptos that take time to adapt to new challenges, and cryptos that rise to face them.
The Network Effect
Another change to Weiss Crypto Ratings’ methodology surrounds the network effect of some cryptocurrencies. Per the firm popular coins like BTC and ETH are likely to become more popular, simply because of their popularity.
The same way projects like Google, Amazon, and Facebook grow because that’s “where everyone goes,” cryptocurrencies like Bitcoin and Ethereum are likelier going to keep adding new users because they’re already filled with activity.
As an example, Weiss Crypto Ratings points to NEO, which started off with “some of the hottest new technology in the crypto universe” but failed to attracted a large developer community to compete with that of Ethereum, and ended up falling behind. Bitcoin’s Lightning Network is also mentioned, as it’s on “its way to greater success than a project like Nano (NANO)” thanks to BTC’s large network.
Finally, Weiss Crypto Ratings is adjusting its methodology to reflect the fact volatility in the crypto space didn’t drop this year as much as it expected, as every once in a while crypto prices still see wild swings, with VeChain (VET) being a recent example.
Given this, the firm is changing its naming conventions so “Risk-Reward Grade” is now “Market Performance Grade” and “Reward” is now “Momentum.” A cryptocurrency’s Market Performance, it adds, now has a smaller role in its overall rating.
Long-term investors are recommended to focus on a cryptocurrency’s Tech-Adoption Grade, while short-term investors and traders are recommended to focus on a crypto’s Market Performance Grade.
No Crypto Gets Overall ‘A’ Ratings
With Weiss Crypto Ratings’ new methodology, no cryptocurrency has received the coveted ‘A’ rating, with Bitcoin and Ethereum having overall ‘B+’ rating. These are followed by EOS, which got a ‘B’ rating, and XRP and LTC, which have an overall ‘B-‘ rating.
Weiss Crypto Ratings has in the past made ti clear the ratings should be interpreted as follows:
- A: “excellent”
- B: “good”
- C: “fair”
- D: “weak”
- E: “very weak”
- F: “failed” or “fraud”
It’s worth noting that earlier this year, in July, Bitcoin had an ‘A-‘ rating, but that the new ranking methodology still helped it rise, which could mean the rating dropped between July and now.
Cryptocurrencies that were negatively affected by the new methodology include Cosmos (ATOM) and Fantom (FTM). Nevertheless, they’re still among the top five coins by technology