Crypto insurance: Investors can protect themselves against these risks
Cryptocurrencies are known as a high-risk investment due, among other things, to their high volatility. But investors now also have the opportunity to protect themselves from a total loss on their crypto investments.
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297.90 EUR 10.35 EUR 3.60%
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88,620.7334 CHF 48.9660 CHF 0.06%
94,936.5796 EUR 52.4558 EUR 0.06%
£83,667.5990 46.2293 GBP 0.06%
16,948,319.7021 JPY 9,364.5359 JPY 0.06%
$110,064.7608 $60.8146 0.06%
0.0000 BTC -0.0000 BTC -0.05%
0.0000 BTC -0.0000 BTC -0.06%
0.0000 BTC -0.0000 BTC -0.07%
0.0000 BTC -0.0000 BTC -1.66%
0.0000 BTC -0.0000 BTC -0.05%
• Cryptocurrencies are considered high-risk investments
• However, investors can also protect themselves against certain risks
• Service providers offer insurance
Crypto investors can now take out insurance from various service providers to protect themselves against certain risks in the crypto market. Insurance is already available on the market for the following risks, among others.
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Crypto exchange hacks
According to BTC ECHO, one danger that crypto investors can protect themselves from is hacker attacks on crypto exchanges such as Binance or Coinbase, where many crypto investors hold their currencies. Even if the crypto exchanges are considered safe, investors can still protect themselves further. If there is a hacker attack on a crypto exchange, the exchange will compensate investors. However, if the exchange cannot cover the damage itself, insurance will take effect.
The service provider Crypto Shield, for example, says it offers “the first regulated insurance product for private crypto investors that covers the theft of crypto while it is in the custody of qualified exchanges.”
According to BTC ECHO, the minimum insurance amount and the term vary depending on the provider and asset. Some policies would also include protection against payout stops.
Stablecoin de-peg risk
In addition, investors can also protect themselves against a stablecoin de-peg by taking out insurance against the decoupling of a stablecoin – which is known for its value stability – from its underlying asset. If the stablecoin then falls below a set limit over a certain period of time, the insurance coverage takes effect. For example, the service provider Opium Finance offers monthly insurance against USDT solvency. “If the USDT price falls below $0.95 by the end of the insurance period, the buyer will receive a full payout on any price difference,” the company said on its website.
Smart contract vulnerabilities
Attacks on smart contracts also occur again and again in the crypto world. Here, insurers offer the opportunity to protect themselves against the exploitation of vulnerabilities in smart contracts and the associated losses caused by exploits and hacks. According to BTC ECHO, for example, InsurAce reimburses compensation if investors lose cryptocurrencies deposited in the smart contract as a result of a hack. Opium Finance offers smart contract bridge protection. “If a bridge is hacked by the end of the policy period, the buyer will receive a payout corresponding to the percentage of money lost,” the insurer said.
Some insurers also offer individual packages with which investors can protect themselves against several risks – the insurance protection is bundled in one contract. However, according to BTC ECHO, the minimum insurance amounts are usually significantly higher.
In addition, insurance providers are of course constantly working on additional products that are intended to help strengthen the trust of buyers and sellers in the crypto market, such as insurance cover for failures of crypto trading venue providers or insurance for hardware wallets or offline wallets, so-called “cold wallets”.
Editorial team finanzen.net