Weiss Ratings released its first ratings assessment of cryptocurrencies, giving Ethereum a “good” B rating while Bitcoin received a “fair” C+ rating.
None of the 74 cryptocurrencies that were rated received the agency’s “excellent” A rating – ethereum and digital currency EOS were the highest rated of the 74 with a B rating.
Weiss gave Bitcoin a C+ rating for its high level of security and widespread adoption, but noted negative aspects of the cryptocurrency such as network bottlenecks and steep transaction costs.
“Despite intense ongoing efforts that are achieving some initial success, Bitcoin has no immediate mechanism for promptly upgrading its software code,” Weiss said.
While Ethereum, the second most popular cryptocurrency, “benefits from more readily upgradable technology and better speed, despite some bottlenecks.”
The ratings agency was criticized by cryptocurrency investors for its grading criteria.
Amazing but HARSH feedback from the crypto community today regarding Bitcoin, Ripple and Dogecoin! For our response, go here: https://t.co/vYtPqA5ysZ
— Weiss Ratings (@WeissRatings) January 24, 2018
Dogecoin, which some people call the ‘fun cryptocurrency’ because it started off as a joke, caught on rapidly. Its market cap now exceeds $2 billion. It has the image of a Shiba Inu Japanese fighting dog in its logo.
In its response to the crypto community, the ratings agency stressed that its rating system does not only consider fundamentals such as adoption and history, but also investor risk-and- reward metrics based on price action.
“…Thanks to Bitcoins strong adoption, brand, and security, it does merit an A … but only on our Fundamental Index.
“Problem: That’s just one of our four major metrics. Meanwhile, Bitcoin falls short in two other important areas: Our Risk Index, reflecting extreme price volatility and our Technology Index, reflecting Bitcoin’s weaknesses in governance, energy consumption and scalability. As soon as the metrics on these improve, an upgrade for Bitcoin is likely.”
Further institutionalization of the cryptocurrency industry
Ari Paul, chief investment officer at cryptocurrency investment firm BlockTower Capital, told CNBC in an email:
“Weiss’ cryptocurrency ratings are a great example of the ongoing institutionalization of the cryptocurrency industry and a healthy addition.
“Their rating of Bitcoin suggests a misunderstanding of the core value proposition of cryptocurrency, however, as they seem to overvalue transaction capacity, and undervalue protocol stability, security, and decentralization.”