Last year was a bullish one for cryptocurrency, as the COVID-19 pandemic accelerated digital transformation worldwide. And as recently as Feb. 14, 2021, the cryptocurrency Bitcoin reached a record high of nearly $50,000 — up from $8,000 in January — driven by an interest in digital currencies from Fortune 500 companies, CNBC reported. The insurance industry is slowly becoming comfortable with the cryptocurrency market; however, its unregulated nature and high-risk potential still make it too risky for some insurers to offer investors and businesses coverage. InsuranceQuotes.com recently released its 2021 Insurance for Cryptocurrency Outlook that outlines the challenges and insurance opportunities available for investors and consumers, including why the insurance market has been slow to respond to demand in crypto insurance. "Despite its huge popularity surge in recent years, cryptocurrency insurance coverage is not widely available. The crypto market faces the unique challenge of being highly volatile and relatively new," said Chris Abrams, founder of Abrams Insurance Solutions, in the report. "Most coverage is offered by crypto exchanges to protect clients against theft and fraud."

Available insurance for cryptocurrency

Most big-name insurers have yet to enter the crypto market, but investors and businesses still have options to protect their crypto assets. Click through the slideshow above to reveal four key insurance coverages for cryptocurrency in 2021, according to InsuranceQuotes.com's report.  A few insurers dedicated to insuring cryptocurrency risk have emerged in recent years, including Coincover, Nexus Mutual, Bridge Mutual and Etherisc. But help is still wanted in the market to meet the increasing demand for good crypto cover, explained InsuranceQuotes.com's Brian O'Connell in the report. "Insuring Bitcoin and other cryptocurrencies are different because the insurance industry is highly established and regulated while the cryptocurrency industry is not," Savannah Bilbo, a cryptocurrency specialist at Pelicoin, told InsuranceQuotes in the report. "Since cryptocurrency is largely unregulated, insured exchanges are a requirement like regular funds are." According to digital wallet provider GateHub, a cryptocurrency exchange or DCE (short for digital currency exchange) is a service/platform that allows clients to trade cryptocurrencies for other resources, with different exchanges providing different options and features. These providers also may offer users the option of purchasing individual cover for their wallet contents, said the InsuranceQuotes report. For example, the exchange platform Coinbase offers insureds custodial wallets to clients. Although some insurers may see exchanges as a stable platform to offer insurance coverage, others do not. In an article published by American Express, Justin Grensing wrote that in the past, exchanges had failed government security checks, and a lack of industry infrastructure has prevented some insurers from offering policies covering crypto. "Additionally, the novelty of cryptocurrency markets means that potential providers are deprived of the historical data on cryptocurrency losses they would otherwise use to predict the value of the risk they are being asked to assume," Grensing noted.

Tips to secure cryptocurrency

InsuranceQuotes.com offers the following guidelines to help investors and businesses keep their cryptocurrency assets insured and secured:

• Read the fine print: No matter what the insurance policy is, it's always important for insureds to read the fine print. Regarding cryptocurrency coverage, it's critical to note how much assets are under the control of the insurer and how much is covered. Sharon Henley, chief product officer at Coincover, shared an example that an insurer can have $1 billion in assets, but only $100 million is insured.
• Share keys: It is wise to spread investments across different wallets and share private keys with trusted custodians to reduce the risk of theft.
• Understand the protection offered: Investors should ask their cryptocurrency custodian whether finds are lent out to other exchanges or investors, said Henley, as this can impact the security of keys. Other questions worth asking include whether a deductible applies to a claim and how the amount of theft is calculated in the event of a hack.
• Diversity wallet holdings: In addition to sharing keys, Chris Abrams suggests that investors should spread their assets across multiple wallets to avoid "keeping all your eggs in one basket."

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