Moody's Launches Digital Asset Monitor to Predict Stablecoin Depeg Using AI

Discover how Moody’s Digital Asset Monitor harnesses AI to predict and track stablecoin depeg incidents.

Unveiling a tool that covers major coins like USDT and USDC, it’s a pivotal move for investors seeking insights into cryptocurrency volatility and risk assessment.

Tracking of Major Coins Including USDT, USDC

Moody's Analytics, a subsidiary of the financial rating agency Moody's Corporation, announced on November 6, 2023, the launch of the Digital Asset Monitor (DAM), which uses Artificial Intelligence (AI) to track the volatility and risk of cryptocurrencies and stablecoins.

Designed to indicate the probability of a stablecoin depegging from its reference price within 24 hours, the DAM at launch is capable of tracking 25 types of fiat-collateralized stablecoins, including 'USDT, USDC, and PYUSD'.

Depegging refers to the state where the price of a stablecoin deviates from the "reference price," which it is supposed to match.

Moody's defines a depeg as a situation where "the stablecoin price fluctuates more than 3% from the reference price in a day".

Risk assessments are carried out using both publicly available information and Moody's proprietary data, specifically considering 'issuer risk, market risk, liquidity risk, custodian risk, and reserve asset risk' in the evaluation of stablecoins.

Furthermore, DAM currently supports major brands that account for over 92% of the market capitalization of fiat-related stablecoins, with plans to gradually support other digital assets in the future.

Depegging Occurrences in Major Coins Reaching 609 in 2023

In the announcement, Moody's Analytics reported that "there have been a total of 1914 depegging incidents with stablecoins up to mid-September 2023, with major stablecoins accounting for 609 of these".

For comparison, the company also reported that "there were a total of 2847 depegging incidents in 2022, with major stablecoins accounting for 707 of these" (major stablecoins include the top five stablecoins by market capitalization, such as DAI).

According to Moody's, "depegging of stablecoins is quite common, with many occurring due to macro factors and coin-specific issues," explaining that in 2022 and 2023, the depegging incidents were triggered by rising interest rates.

More details on the Digital Asset Monitor (DAM) released by Moody's Analytics can be found on the "official Moody's Analytics announcement page".