• 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 with various service providers to protect themselves against certain risks in the crypto market. Insurance is already available in the market for the following risks, among others.
Crypto exchange hacks
According to BTC ECHO, one danger crypto investors can protect themselves against is hacker attacks on crypto exchanges like Binance or Coinbase, where many crypto investors hold their coins. Even if crypto exchanges are considered safe, investors can further protect themselves. If there is a hacker attack on a crypto exchange, the exchange compensates the investors. However, if the stock market cannot pay for the damage itself, the insurance company will take action.
Service provider Crypto Shield, for example, claims to offer “the first regulated insurance product for private crypto investors that covers crypto theft while in the custody of qualified exchanges.”
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According to BTC ECHO, the minimum sum insured and the term vary depending on the provider and the asset. Some policies would also include payment freeze protection.
Peg Stablecoin Risk
Investors can also protect themselves against the decoupling of a stablecoin by taking out insurance against the decoupling of a stablecoin, known for its stable value, from its underlying asset. If the stablecoin then falls below a specified limit for a certain period of time, the insurance coverage kicks in. For example, the service provider Opium Finance offers monthly insurance against USDT solvency. “If the price of USDT falls below $0.95 at the end of the insurance period, the buyer will receive full payment for any difference in price,” the company said on its website.
Smart contract vulnerabilities
Smart contract attacks are also common in the world of cryptocurrencies. Here, insurers offer the opportunity to protect themselves against the exploitation of vulnerabilities in smart contracts and the associated losses through exploits and hacks. According to BTC ECHO, for example, InsurAce reimburses compensation if investors lose cryptocurrencies stored in the smart contract as a result of a hack. Opium Finance offers Smart Contract Bridge protection. “If a bridge is hacked at the end of the insurance term, the buyer will receive a payment based on the percentage of money lost,” the insurer said.
Some insurers also offer individual packages with which investors can protect themselves against various risks: the insurance protection is included in a single contract. However, according to BTC ECHO, the minimum sums insured are usually significantly higher.
In addition, insurance providers are, of course, constantly working on other products intended to help strengthen the confidence of buyers and sellers in the cryptocurrency market, such as insurance coverage for the failure of cryptocurrency trading venue providers. cryptocurrencies or insurance for hardware wallets or offline wallets, so-called “cold wallets”.
Finance.ch Editorial Office