Bitcoin is a burgeoning asset, and it is vital that its valuation is properly reflected by the rating agencies. In this article, we’ll cover the S&P Global Market Intelligence, Moody’s, Standard & Poor’s and FTSE Russell. These ratings agencies are considered the most reliable and impartial.
S&P Global Market Intelligence
S&P Global Market Intelligence rates Bitcoin according to its market cap, which is equivalent to the supply of a Bitcoin divided by its price. It will include additional coins in its index series. The index includes both large cap and broader market benchmarks. The company will also offer a product center with expert guidance.
The downgrade reflects Coinbase’s weaker performance in the second quarter of 2022 as well as the increasing competitive risk in the cryptocurrency exchange sector. The company saw a decline in market share this year and has been facing competition from other exchanges. The downgrade comes as the company faces increased regulatory risks.
Moody’s rates Bitcoin on a variety of factors, including Coinbase’s financial health, the price of crypto assets, and the volume of trading. In addition to analyzing these metrics, the rating agency also evaluates the company’s cash and non-cash expenditure paths. The company must also show persistence in a crisis.
El Salvador’s recent Bitcoin buying spree may have increased its credit risk. Last year, Moody’s downgraded the Central American country’s credit to Caa1, citing a challenging redemption schedule and deterioration in policymaking. However, El Salvador recently made Bitcoin legal tender and recently announced the issuance of a $1 billion 10-year Bitcoin bond.
Nevertheless, the cryptocurrency market is still relatively small and lacks adequate liquidity. Companies are taking steps to combat the problem by adopting anti-money laundering procedures. However, some bad actors are using innovative cryptographic technology to disguise details of their transactions.
Standard & Poor’s
Standard & Poor’s is a major data provider and index creator, and the issuer of credit ratings. Founded in the 1860s, the firm has been in business for over a century. Its most famous index tracks the performance of the 500 largest U.S. companies. The name S&P was derived from the merger of two financial data publications. In 1941, S&P merged the Standard Statistics Bureau and the railroad price journal.
The S&P rating system evaluates a number of financial instruments, including stocks, bonds, and other securities. In other words, it ranks the value of debt and short-term assets. Bitcoin, on the other hand, has no revenue streams, annual reports, or dividend payments to compare it to other types of securities.
With a growing institutional interest in digital assets, FTSE Russell has launched its FTSE Digital Assets index series, including FTSE Bitcoin, Ethereum, Cardano, and Ripple. The aim is to provide institutional investors with a reliable and transparent reference price for each of these digital assets. The index series is the result of collaboration between FTSE Russell and Digital Asset Research, which monitors and reports on the digital asset market.
As a global index provider, FTSE Russell offers index products and innovative benchmarking solutions. Its products and expertise are used by both institutional and retail investors. Its indexes currently cover 98% of the investable market worldwide, and they are the basis for index-linked products and ETFs.
S&P Global Ratings
Coinbase has been downgraded by S&P Global Ratings, which cited the company’s weak performance in the second quarter. It also said that its credit metrics are too low and that it’s facing increased competition. This has led to a decline in its stock price and lowers its credit rating.
The company has also raised concerns about the cybersecurity of cryptocurrency. It cites recent hacking of a New Zealand-based cryptocurrency exchange and suitability concerns. Moreover, the regulatory environment for cryptocurrencies is not yet ripe. Regulators in the U.K. have already banned the retail sale of exchange-traded notes and derivatives. S&P Global Ratings also points out the lack of regulation in some countries.
The company has also formed a new group to focus on DeFi, or decentralised finance. The group’s members include Charles Mounts, chief DeFi officer, and Charles Jansen, head of the DeFi transformation.