The last few years have witnessed a meteoric rise in the use and popularity of cryptocurrency. Bitcoin is the undeniable kingpin of cryptos. Other notable digital currencies include Ethereum, XRP, Cardano, Tether, and Stellar, to name a few. Given the often high values of these cryptocurrencies, there’s the ever-present risk of theft. Here are several ways you can protect your crypto investments.
Cryptocurrency Insurance Policy
For a lot of small to midsized enterprises (SMEs), cryptocurrency has provided the ability to avoid conventional financial systems. This includes the regulations and intrusiveness associated with these systems. Today, with the exponential rise in cryptocurrency, there is a need for infrastructure to support the currency. Therefore that’s where crypto insurance policies come in. Crypto policies are designed to protect your crypto against both losses and theft.
Perhaps the most enticing feature of cryptocurrencies lies in their decentralization. Crypto lacks a central authority to monitor the overall exchange activities and transactions. However, this characteristic makes it easy for cybercriminals to hack into trading platforms and run off with funds.
Data from Finaria, a London-based finance and investment company,in 2020 crypto criminals stole roughly $1.9 billion. While this value is astronomical, it pales in comparison to 2019’s $4.5 billion. There have been some landmark instances of crypto theft in the past. Mt. Gox lost $460 million in 2014, Coincheck lost $530 million in 2018, and Bitfinex has $72 million stolen in 2016. Such attacks prove that even though most cryptocurrency platforms are deemed safe, there’s always the threat of cybercriminals.
As an individual or business using cryptocurrencies as a form of payment, the risk of theft can be greatly mitigated via a crypto policy. Crypto risk coverage covers financial losses resulting from cyber-related events. Crypto insurance protects your wallet from instances of theft, denial of access, or harmful cyber-attacks.
Cryptocurrency Exchange Insurance
The high crime and fraud associated with crypto make a lot of insurers hesitant to insure digital currencies. Since coverage isn’t widely available, most cryptos aren’t insured today. According to Coindesk, only 4.2 percent of all crypto is insured. One way crypto exchanges are circumventing this issue is by creating their own insurance programs.
The exchange programs add a small percentage of each transaction is added to the collective funds to cover against hacks. Larger exchanges such as Gatehub offer wallets to their investors. Which they may use to buy individual insurance for the whole value of their crypto wallets. Other exchanges such as Coinbase offer additional insurance covering users who lose 10 percent or more of their crypto assets.
Self-Insurance
As a crypto investor, you’re likely to encounter sky-high premiums for your crypto assets. Another way to insure your crypto investment is to take matters into your own hands. This works by sharing your private keys with one or two independent. As well as trusted custodians to safeguard your wallet from theft. You may also opt to spread your investments into multiple wallets to minimize your risk in case one wallet goes down the drain.
In a Nutshell
Cryptocurrencies have been a revolutionary tool in the world of trade. There are, however, risks associated with digital currencies which have led many investors to seek ways to protect their assets. Custodians, exchanges and other service providers in the world of cryptocurrency have access to insurance for their customers. Be sure to inquire with them about the safety and opportunities to secure insurance for your investments. As a crypto investor looking for some safety and security, crypto policies, exchange insurance, or self-insurance are all viable ways to secure your cryptocurrencies.
