Financial intelligence company Moody’s Analytics has unveiled a new AI service, the Moody’s Analytics Digital Asset Monitor (DAM), which is designed to predict stablecoin depeggings and provide real-time insights about stablecoin issuers’ liquidity and stability.
Innovative AI Service for Stablecoin Market Analysis
In a press release, Moody’s Analytics announced the launch of its new AI-powered service, DAM, which utilizes machine learning algorithms to analyze the stablecoin market. The primary objective of DAM is to signal and predict the probability of a stablecoin depeg from a fiat currency within a 24-hour timeframe.
“We have seen the stablecoin market grow into a multibillion dollar asset class accounting for about 10 percent of the crypto market and most on-chain activity,” said Yiannis Giokas, senior director of product innovation at Moody’s Analytics. “However, given ongoing volatility in the asset class, we saw substantial demand from our customers to fill a gap in this space with a comprehensive risk assessment tool for digital assets.”
The Moody’s DAM model provides real-time insights regarding the stablecoin’s market and liquidity dynamics, as well as the stability of the stablecoin issuer. It also assesses the custodians that hold the stablecoin’s assets and evaluates the quality of these reserves. Additionally, the model incorporates a transparency index to highlight the disclosure quality of the entities supporting fiat-backed stablecoins.
Monitoring Fiat-Backed Stablecoins and Future Expansion
The initial version of DAM will track 25 fiat-backed stablecoins, including popular ones such as Tether, USDC, and PayPal Coin. Moody’s Analytics plans to expand the platform by adding other digital assets in the future.
Moody’s Analytics recognizes the need for a comprehensive risk assessment tool for digital assets due to the increasing significance of stablecoins in the crypto market. The company aims to address the volatility and potential risks associated with stablecoins by providing investors and market participants with real-time insights and predictive analysis.
“The tool was built in a year using agile-development frameworks to confront customer needs,” added Yiannis Giokas.
In its announcement, Moody’s Analytics also highlighted the stabilizing nature of the stablecoin market. The company reported that in 2023, there have been 1,914 depeggings so far, with 609 of them being fiat-backed large-cap stablecoins. In 2022, there were 707 large-cap depegs and a total of 2,847 depegs.
Moody’s Analytics emphasized that depegging is surprisingly prevalent among stablecoins and can occur due to various macroeconomic and coin-specific factors, with interest rate fluctuations being a prominent trigger.
Furthermore, Moody’s announced the launch of DeFi Communities, a platform designed for DAM users to exchange ideas and share views on digital assets and decentralized finance.
