Cryptocurrencies are put to the test under this grading,and most of them came up with mediocre or subpar grades. Since the beginning of 2017, there have been no other assets which have been as impressive as cryptocurrencies. Between 2016 and 2018, the aggregate value of all virtual currencies combined has sought more than 4500%. If you think about it, such gains will take traditional stock indexes decades to produce.
However, these games have raised a lot of questions and also restart. No doubt the rapid appreciation in any asset class, which has not been held in the long run will raise questions. Investors do have a history of overestimating the adoption of new technology as well. The case of cryptocurrencies, investors may be overestimating how quickly big business willadopt blockchain technology.
Furthermore, they may be overestimating how it will be digitalized, distributed and how blockchain will underpin cryptocurrencies. The blockchain is not anything new. It has been around for about a decade. But businesses today are testing it insmall-scale applications.
So, what is a realistic outlook for cryptocurrency valuations?
Weiss Ratings took on the challenge to tackle this question. Although so, it must be noted that no one knows the answer for research on. The rating firm has just graded 74 of the most popular cryptocurrencies. For more than four decades, this agency has been offering it’s been on investments. This past week, open its doors to cryptocurrencies. Hence, we will take a look at virtual currencies as aninvestment. Therefore, we will take a look at several aspects of the cryptocurrencies, to see why the grade was given.
Before anything, the rating firms want the public to know that their method of modeling is not perfect. No one has all the information needed to give a precise grade these cryptocurrencies. Ultimately, these are nothing more than to current opinions about the virtual coins. This may very well change as the crypto dynamics shift. It is quite clear today that there is no such thing as safe cryptocurrencies since digital currencies are in its early stage of therevolution.
Now, let’s take a look at some of the gradings.
- Bitcoin: C+
This is the world’s most popular cryptocurrency. It has the highest market capitalization,and it came up with of fair grade of C+. Investors have racked up an insane amount of wealth since its creation in 2010 because of its relatively strong public acceptance. One thing to take into account is that Bitcoin does have genuine issues that need to be dealt with. For example, it is network is considered to be very slow compared to its peers. In fact, it was found that Bitcoin’s blockchain is capable of processing a maximum of seven transactions per second.
This makes them lag behind its peers. Not to mention, the average cost of thetransaction is $28 on Bitcoin’s network, which is almost the same bank wire transfers. There are clear technological and fundamental obstacles that Bitcoin has to address if it wants to improve its grading.
- Ethereum: B
Believe it or not, Ethereum got a B, which is the highest rating that this agency ever granted. This represents a good rating. The only other cryptocurrency to earn a B grade was EOS. Today, it is not difficult to see why Ethereum ranked so highly on this list. It is the second-largest cryptocurrency by market capitalization, just behind Bitcoin. In fact, many other brand-name businesses around the world are testing on its blockchains more than any other. The alliance that Ethereum founded in February 2017 currently has around 200 members.
Ethereum is best known for its smart contracts. These are that basically protocols which help in verification, facilitation or enforcement of a contract. They are customizable and very attractive to businesses. This means that Etehreum’s blockchain will often serve as a foundation from which blockchain foundation begins. Furthermore, blockchain also transcends Bitcoin currency only application which gives the blockchain considerably higher long-term adoption potential.
- Ripple: C
Ripple received a C, which is the same given to Dogecoin, a cryptocurrency that was started out as a joke. At the moment, Ripple does have a lot of things working in its favor, including increasing number of financial partnerships. In its latest deal, it will see its native cryptocurrency being used to expedite money transfer settlements for MoneyGram. This can effectively reduce transaction fees and represents the potential of this financial services focused cryptocurrency.
In spite of its fast processing times, this cryptocurrency has been a massive price fluctuation in its native cryptocurrency. So far, it has not demonstrated that its blockchain is capable of maintaining the high transaction processing speed under a real-world test. However, success in its MoneyGram partnership will definitely dispel some of the worries people have about this cryptocurrency.
- Bitcoin Cash: C-
This is the world’s fourth-largest cryptocurrency by market capitalization. It was the one that got forked out from Bitcoin last summer. Why was given such a harsh grade? This cryptocurrency faces a lot of challenges which Bitcoin already features which include high electricity use, processing times and it is very slow compared to traditional bank network. Furthermore, this cryptocurrency also has a very few real-world uses as not many merchants accept this cryptocurrency.
Wrapping it up
So far, no cryptocurrencies received an F,and no other grade is higher than a B. However, a handful of smaller market realization cryptocurrencies did receive a D grade. The message is clear here. Cryptocurrencies are by nature, highly speculative. Therefore, for it to be labeled as a safe investment, we need to see a considerable maturation and consolidation before it can become a safer investment.
More importantly, this signal that most cryptocurrencies are not in the same zone. It is a highly volatile investment. Perhaps this is the reason why that many investors are turning towards currencies to make quick money. If they were to invest their money in traditional assets, it would take decades for them to achieve the same returns that they had with Bitcoin.
However, how many other cryptocurrencies are as good as Bitcoin? This is the challenge. As more people are flocking towards new cryptocurrencies and more start-ups are creating initial coin offerings to create new cryptocurrencies, it can be a continuous challenge to determine which one is good and which one is bad. Ultimately, thepotential is something that people are willing to bet on.
This is because it is not something that is tangible and you can see it today. Instead, investors believe that it will happen in the future and they are willing to put their money on it. Before putting your money in any cryptocurrencies, make sure you do your research and due diligence.