Moody’s Analytics has introduced a novel service that utilises artificial intelligence to forecast the likelihood of stablecoin depeggings within a 24-hour timeframe, offering real-time insights into the liquidity and stability of stablecoin issuers.
In a recent announcement on November 6, Moody’s noted the increasing stability of the stablecoin market with the launch of their Digital Asset Monitor.
So far in 2023, there have been 1,914 depeggings, of which 609 pertained to large-cap stablecoins backed by fiat currencies. This marks a decrease from the 2,847 depeggings recorded in 2022, with 707 involving large-cap stablecoins. Moody’s suggested that while there is some correlation with rising interest rates, specific factors related to individual coins also play a role in these depeggings.
Schematic of Moody’s Digital Assets Monitor. Source: Moody’s
Moody’s DAM will monitor 25 fiat-backed stablecoins, which collectively represent more than 92% of the total stablecoin market capitalisation. Notable stablecoins in this group include Tether (USDT), USD Coin (USDC), and PayPal Coin (PYUSD). The service plans to incorporate additional stablecoins over time.
Digital Asset Monitor (DAM) is a machine learning model that combines on and off-chain data, financial statements, and economic indicators. In addition to identifying depegging risks, DAM will offer insights into the stablecoin’s market and liquidity dynamics, the issuer’s stability, the custodians holding the stablecoin’s assets, and the quality of reserves. Furthermore, it will provide a transparency index, highlighting the quality of disclosures made by the entities behind these fiat-backed stablecoins.
Yiannis Giokas, Senior Director of Product Innovation at Moody’s Analytics, stated that,
“The tool was built in a year using agile-development frameworks to address customer needs,”
It’s worth noting that Moody’s Analytics is a distinct entity from Moody’s Ratings and regularly provides commentary on various aspects of the crypto asset market.