Moodys unveils service that uses artificial intelligence to predict stablecoin depegging

Moodys unveils service that uses artificial intelligence to predict stablecoin depegging

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Moodys Analytics is launching a new stablecoin service that uses artificial intelligence to predict potential depeggs over a 24-hour time horizon, while providing real-time insights into the liquidity and stability of stablecoin issuers.

In its November 6 announcement to launch a digital asset monitor, Moody’s observed that the stablecoin market is becoming more stable.

So far in 2023, there have been 1,914 depeggings, of which 609 were for major fiat-backed stablecoins. This compares to 2,847 cases in all of 2022, of which 707 were large companies. While some correlations can be seen with rising interest rates, a number of coin-specific causes can also be identified, Moody’s said.

Schematic of Moody’s Digital Asset Monitor. Source: Moody’s

Moodys DAM tracks 25 fiat-backed stablecoins that account for more than 92% of the total stablecoin market cap. They include Tether (USDT), USD Coin (USDC) and PayPal Coin (PYUSD). According to its website, more stablecoins will be added to the service 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 stablecoin risks, this service shows the dynamics of stablecoin liquidity and market, the stability of stablecoin issuers, stablecoin asset custodians, and the quality of these reserves. Additionally, it provides a transparency index that highlights the quality of disclosures made by the entities backing these fiat-backed stablecoins.

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The tool was built in a year using agile development frameworks to meet customer needs, Moodys Analytics senior director of product innovation Yiannis Giokas said in the announcement.

Reports about the development of this new service by this company were published at the beginning of the year. Moodys Analytics is a separate company from Moodys Ratings. Provides regular commentary on aspects of the crypto asset market.

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