99% Crypto Assets Without Insurance, What Hinders it?
The latest statistics show that the number of crypto holders over the world has exceeded 70 million, and the market value of crypto is approaching $300 billion. However, the amount of insurance premiums available for crypto industry is less than $1 billion. Today, the total income of insurance for crypto is between $200-$500 million. In the next few years, the crypto insurance may become a dark horse.
Although the cryptocurrency itself is based on advanced digital technology and the major crypto exchanges spend a lot of manpower and financial resources to optimize asset security every year, network security is still one of the biggest threats to the industry.
In January to June in 2019, seven crypto exchanges including Bithumb, Bitrue, GateHub and Binance, suffered massive hacker attacks with loss of billion dollars.
In the eyes of many cryptocurrency holders, the hedging attribute is the most important feature of cryptocurrencies, so cryptos take to itself wings because of accidents is becoming a problem. In fact, Many crypto platforms have chosen to seek cooperation with insurance companies.
The short cycle of cryptocurrency and the large fluctuation of price force insurance companies to be cautious about the cooperation with crypto exchanges.
For insurance companies, frequent fluctuations in prices will affect the valuation of insurance premiums, thus increasing the difficulty of negotiation. For crypto institutions, fluctuating prices will play a role in the compensation phase. If the cryptocurrency price at the time of payment is far higher than the price at the time of signing the policy, the insurance company will inevitably be able to compensate only a small part of the loss.
Since insurance premiums are usually calculated on the basis of historical data, the combination of the crypto industry and the insurance industry is still in its infancy with few data and cases available for reference. It is a taboo for insurance companies to take part in business like crypto industry which is with high risk.
However, considering that the large potential of crypto market and the demand of customers for the security of assets provided by exchanges is booming, many insurance companies still pay close attention to crypto industry.