Moody’s has unveiled a new AI service to predict possible deprecations of stablecoins from the underlying assets. The service will also provide real-time information on the liquidity and stability of stablecoin issuers.
Representatives of Moody’s Analytics have reported the launch of the Digital Asset Monitor (DAM). It’s an AI-enabled service that uses a machine learning model to combine on-chain and off-chain data, financial statements, and economic indicators. Analysts claim that the tool will be able to predict depegs of stablecoins in a 24-hour time horizon.
The DAM will track analytics on 25 stablecoins pegged to fiat currencies. Among them are Tether (USDT), USD Coin (USDC), Binance USD (BUSD), PayPal Coin (PYUSD), TrueUSD (TUSD), First Digital USD (FDUSD), and other coins that account for more than 92% of the total market cap of stablecoins. In the future, the developers plan to expand the analyzed assets, covering all stablecoins whose value is tied to fiat currencies.
The DAM will assess several categories of risks that can affect the value of stablecoins:
- Issuer Risk. Assessing the quality of the issuer of the stablecoin.
- Market Risk. Assessing the intra-day volatility to compare it to fiat assets that stablecoins are pegged to.
- Liquidity Risk. Assessing the depth of the market to make sure investors won’t end up in an illiquid environment.
- Custodian Risk. Assessing the quality of custodians that hold reserves on behalf of the stablecoin issuers.
- Reserves Risk. Assessing the quality of reserves based on their volatility and risk.
According to Yiannis Giokas, Senior Director Product Innovation at Moody’s Analytics, the tool took the company about a year to develop. The service is based on an agile development methodology that allows the tool to be customized to clients’ needs. Giokas says the company has focused on stablecoins for a reason.
In 2023, there were 1,914 depegs of stablecoins. 609 of those came from coins backed by fiat assets. In comparison, 2,847 depegs were recorded last year and about 707 were large cap depegs. Thus, there’s a decrease in the number of depegs of stablecoins, which signals an increase in the stability of the stablecoin market.
S&P Global analysts have identified the most unstable stablecoins, including only one asset pegged to the value of fiat currency — USDC. At the same time, USDT was recognized as the most popular asset in Brazil.
