Moody’s Analytics, a leading financial intelligence, and credit rating agency, has unveiled a groundbreaking service called Digital Asset Monitor (DAM) that employs artificial intelligence (AI) to predict stablecoin depeggings within a 24-hour time frame. The new service aims to provide real-time insights into the liquidity and stability of stablecoin issuers. Moody’s Analytics observed that the stablecoin market is becoming more stable, as indicated by the decline in depegging incidents.
According to Moody’s Analytics, there have been 1,914 stablecoin depeggings in 2023, with 609 of them involving fiat-backed large-cap stablecoins. This marks a decrease compared to the 2,847 depeggings recorded in 2022, with 707 involving large-cap stablecoins. While rising interest rates have contributed to some of these depeggings, Moody’s notes that various coin-specific factors also played a role in these incidents.
Stablecoin market stabilization
Moody’s DAM will initially track 25 fiat-backed stablecoins, collectively representing over 92% of the total stablecoin market capitalization. Notable stablecoins like Tether (USDT) and USD Coin (USDC) are among those covered. The service plans to incorporate more stablecoins over time to enhance its predictive capabilities.
DAM is powered by a machine learning model that combines both on-chain and off-chain data, financial statements, and economic indicators. Its primary focus is to identify potential depegging risks associated with stablecoins and provide valuable insights into:
Market and Liquidity Dynamics: DAM will analyze the market behavior and liquidity patterns of stablecoins.
Stablecoin Issuer Stability: The service will assess the financial stability of the entities behind these stablecoins.
Custodian Oversight: DAM will provide information on the custodians responsible for holding the assets backing the stablecoins.
Quality of Reserves: It will evaluate the quality of reserves held to support the stablecoins’ value.
Transparency Index: DAM will introduce a transparency index that highlights the quality of disclosures made by the entities behind fiat-backed stablecoins.
Yiannis Giokas, Senior Director of Product Innovation at Moody’s Analytics, emphasized that DAM was developed in just one year using agile development frameworks to address the specific needs of customers. This highlights the company’s commitment to delivering relevant and innovative solutions in the rapidly evolving cryptocurrency market.
Distinguishing Moody’s analytics from Moody’s ratings
It’s worth noting that Moody’s Analytics is a distinct entity from Moody’s Ratings. While Moody’s Ratings primarily focuses on credit ratings and risk assessment, Moody’s Analytics provides commentary and insights on various aspects of the cryptocurrency asset market. The launch of DAM underscores the growing importance of advanced data analytics and AI-driven solutions in assessing and managing risks in the crypto industry.
