Investing in cryptocurrency is seen as risky
According to Ciphertrace, hackers have stolen over $4 Billion in crypto crimes in 2019, up from $1.7 Billion in 2018. With this trend set to continue and as the value of cryptocurrency grows, insurance will be essential to reduce the risk to investors and increase wider market confidence and adoption.
At today’s valuations the total all time losses resulting from cryptocurrency theft are over $20 Billion.
Why is cryptocurrency insurance necessary?
Aside from the simple answer that without insurance if your cryptocurrency is stolen there is practically no way of getting it back. There is another reason – market confidence.
30% people said they aren't buying cryptocurrency because they felt it was too high risk.
The success of any asset class from property to equities is hugely dependent on market confidence. Investors need to believe not only that values will increase but also that the market is safe and secure. Cryptocurrency gives you direct ownership of your digital assets without the need for traditional financial intermediaries such as banks. But as a result you take on a lot of personal risk by managing the storage yourself.
In a recent survey, when asked why they weren’t buyingcryptocurrency, over 30% said it was because it was too high risk.
In more established markets regulation, oversight and insurance give us the assurance that our funds are safe from theft, the failure of a bank or if someone uses our credit or debit card fraudulently. In cryptocurrency, very few investors have these safety nets today.
In cryptocurrency markets, insurance against theft is starting to play the role of financial institutions and regulators in more established markets increasing market confidence and removing a significant barrier to entry for those worried about investing. At the same time insuring your crypto protects you against the very real risk of your funds being stolen by cyber-criminals who are increasingly targeting them.
In a series of 5 blog posts we will provide a complete guide to the fast-growing market of cryptocurrency insurance covering topics including what does it cover? Why do we need it? What different types are available? How do I minimise my risk?
Read Part 1: 5 Common types of cryptocurrency theft and how to protect yourself against them.