As the adoption of crypto increases, several scams are coming to light within the industry. With the increasing size of the crypto industry, the risk of scammers and hackers robbing your funds is increasing too. In 2021 alone, crypto scammers managed to take home a whopping $14 billion. This marked a 79% increase in losses from crypto-related crimes from 2020. These numbers provide an opportunity for the insurance industry to test its utility in the crypto space. Crypto insurance is among the latest crypto trends. Amid the increasing awareness regarding the risks associated with crypto, investors are exploring measures to safeguard their funds.
The Need For Insurance In Crypto Industry
If you are in the crypto industry for some time now, you must be aware of the extreme volatility in the market. Besides the volatility, there are several other risks associated with the crypto market. The crypto economy runs on the success of evolving startups and their adoption on the basis of real-world use cases. Once the tokens of various projects are listed on an exchange, they can be affected by market volatility, manipulation, bearish sentiment and other critical factors. Given the market instability, investors can do a little about safeguarding their funds against such developments. The insurance industry can play a vital role in safeguarding the funds of investors.
With millions of new investors jumping on the crypto bandwagon, the stage is set for crypto insurance companies to kickstart their campaigns. Added security could act as a boost for the crypto industry, attracting more investors to put their money in digital assets.
Reasons Why Crypto Insurance Can Make It Big
- Top Companies Accepting Crypto As Payment: Over 15,000 businesses including Microsoft, Paypal, AT&T, and Mastercard accepts Bitcoin or other cryptocurrencies as payment. With so many businesses using crypto for payments and cross-border transactions, there is a need for greater security for funds. Companies are likely to invest in this direction. Crypto insurance startups can take a hint from the rising demands for increased security to take a giant stride.
- Regulation: Governments across the world are regulating crypto transactions. This is a major boost more the growth of the industry amid rising uncertainty due to frequent rallies and dumps. With governments taking a positive stance about the use of digital assets like Bitcoin, traditional financial institutions have also started adopting crypto. This positive outlook of the industry may mark a shift in the interest of traditional investors. Millions of new investors jumped on the crypto bandwagon last year. Traditional insurance companies would find it safer to provide their services under a regulatory framework.
- Increasing Adoption: 41 percent of the net global investors invested in crypto for the first time in 2021. 55 percent of bitcoin investors purchased it in 2021. Crypto is emerging as a great alternative to FIAT. The adoption of crypto continues to skyrocket amid rising inflation and events like the Russia-Ukraine war. With the crypto market growing in size and numbers at a staggering pace, crypto insurance companies will have a bigger customer base to cater to. Traditional insurers can target both seasoned investors and newcomers with customized insurance plans.
- Growth Of Decentralized Finance: Decentralized Finance (DeFi), which aims to put an end to the limitation of traditional finance, continues to grow steadily since 2020. Going forward, DeFi could witness greater institutional involvement. Since DeFi has emerged as a parallel alternative to traditional finance, insurance companies would be eager to capture the DeFi market. The competition between insurers to be the first-mover could well lead to the rapid growth of the crypto insurance industry.
Final Word
While security and transparency are the key traits of the crypto industry, factors like high volatility, scams and wallet hacks continue to concern investors. The bigger the investors, the higher the value at stake. Going forward, investors in crypto are likely to invest more in safeguarding their funds. Crypto insurance companies could emerge as a one-stop solution for such needs. With years of experience in traditional insurance, insurers can come up with customized plans to accommodate a wider range of investors. How investors approach crypto insurance would be interesting to see.