A new credit rating scale for cryptocurrency and venture capital investments

A new credit rating scale for cryptocurrency and venture capital investments

Olá pessoal seguidor do Dinheiro 2.0.

Este artigo, em Inglês, é para aqueles que desejam se aprofundar nas leituras de risco as Criptos, com alguma referência no mercado financeiro tradicional.

Segue abaixo a transcrição do artigo.

Fonte: medium.com – por Sébastien Lapedra – www.vidalcapital.com – www.dnotches.io

The recent cryptocurrency correction highlights the risk of blockchain investments. Thrilled by extreme valuation, some investors have probably neglected the risk embedded in this new business. At Vidal Capital we are working hard to provide investors with best in class market intelligence tools. One of our tools is a new credit rating framework (DNotches) that we apply to cryptocurrencies. In this short article I would like to share our new credit rating scale.

Main cryptocurrencies market overview

Rating systems provide simple ranking to evaluate future creditworthiness of securities. If for standard investments, investor can rely on well-known rating agencies, it is not the case for cryptocurrencies and other digital assets.

The standard rating scale (Moody’s, S&P) is AAA, (almost no default), AA1, AA2, AA3, A1, A2, A3, BBB1, BBB2, BBB3, BB1, BB2, BB3, B1, B2, B3, CCC1, CCC2, CCC3, CC, C and D (default). This range is used for companies with already established businesses. In order to cover Venture capital, startup or cryptoasset investments, the scale has to be extended. A natural way would be to:

  • extend category CC and C
  • introduce VC (Venture Capital) and FFF (business angels) categories in order to represent the distinct phases of a start-up and venture capital investment.

Venture Capital investment phases

The final scale would take the following form:

Extended credit rating scale

Personally, I find such a scale over-complicated. First the rating naming convention does not immediately highlight the investment style category. Secondly ICOs are democratizing crowdfunding, usually reserved to big investors, meaning that the distinction between business angels and venture capitalist investors is vanishing.

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