Fitch: Bitcoin-backed securities carry speculative-grade risk

Global credit rating agency Fitch Ratings has warned that securities backed by Bitcoin carry a level of risk comparable to speculative-grade investments, Cointelegraph reported. Fitch identified Bitcoin's inherent price volatility and counterparty risk—the possibility that a party in a financial transaction could default on its contractual obligations—as the main risk factors. The agency noted that a sudden drop in volatility could breach the collateral maintenance ratio, which is the value of Bitcoin collateral relative to the issued debt. This could cause the collateral's value to plummet and lead to investor losses. Fitch added that the bankruptcies of crypto lenders such as BlockFi and Celsius demonstrate how collateral-based models can quickly collapse during periods of market stress.