Cryptocurrencies are being eyed heavily by Wall Street, even without any real crypto insurance. The stakes have risen and the current market situation presents a great opportunity for large players. Many of the interested institutional investors will take this chance to entangle the unique asset class with many of their own requirements.
There is currently an alarmingly large need for qualified custodians to hold the assets of these large investors. The money these investors trade need to be kept and regulated in the same way as in a traditional financial ecosystem.
The biggest problem however, which is not often discussed is the big investors’ desperate need for crypto insurance. These investors are ready to throw in piles of money, but they need insurance against theft for all the assets that are placed in the new custodian’s care.
There simply isn’t enough crypto insurance to guarantee a large entry of investors. The total coverage for the crypto industry is a little more than $6 billion and that is simply nowhere near enough. Just to put things into perspective, the three biggest crypto exchanges each have a daily trading volume that exceeds $1 billion. Despite the incredibly rough week for the crypto market, the market cap is well over $140 billion.
Crypto Insurance needs to increase
It’s no rocket science that crypto insurance is paramount to investing. Especially in an ecosystem as new and as volatile as crypto. The high risk and bad project reputation tied with crypto and ICO projects isn’t making investing any easier. Criminals all over the world are still picking crypto as their number 1 target despite the rough market conditions.
One of the main reasons for the lack of insurance is that in terms of history of losses and claims, there is almost nothing to go on. This makes it impossible to correctly or at least barely estimate an accurate perception about the risk.
Additionally, there are two types of insurance product providing crypto policies today: the specie market and the commercial crime market.
The specie market has usually insured vaults or specially designed facilities where very expensive art or gold bullion are stored. Custodians are looking for this sort of insurance for cold storage, where people’s private keys to a wallet are kept in an offline space.
Commercial crime on the other hand covers cash, ATM placement and moving (often in an armored vehicle) and it’s that very same market, which provides coverage for hot wallets.
Every single large exchange is without a doubt talking to both markets. Coinbase has shared that less than 2% of their assets are kept in hot wallets while the remaining 98%+ are kept in cold storage. The company stored more than $25 billion worth of assets during the height of the bull market.
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