Problem scenario
You have a sizable cryptocurrency position. You are concerned that if you lose it, you will not be able to get it back. What should you do?
Solution
This is not legal advice.
- Self-insure. Ensure you use multi-factor authentication if you use an online platform. If you need a username, a password, and access to a separate physical device (such as a smart phone for a passphrase or code number), it should be difficult to hack. If you do not use an online platform, it may be wise; you can use a cryptocurrency wallet, which is arguably more secure. One such wallet is Trezor. The Trezor wallet has the highest rating on CryptoCompare.com.
- Play it safe. Use Coinbase, Gemini Exchange or BitGo for a potential online provider. According to this article, they provide some insurance to the cash holdings. We do not know how much is insured and what the terms of making a claim are. So do be careful. But we do not recommend shunning investing in cryptocurrency either. Staying with a reputable company with a risky undertaking helps mitigate loss in general. (Coinbase often offers up to $200 in free coins when you sign up for the first time.)
- Read more about this topic. These next articles, as of July 2020, give some insight into a new market for insurance:
- https://www.investopedia.com/news/cryptocurrency-insurance-could-be-big-industry-future/
- https://www.quora.com/I-just-lost-6-5btc-to-a-bitcoin-scam-How-can-I-get-it-back
- https://www.americanexpress.com/us/foreign-exchange/articles/cryptocurrency-insurance-market-shows-promise-with-caution/
- https://cointelegraph.com/news/keeping-your-assets-safe-crypto-
insurance-may-soon-become-the-norm
4. Try to find a wealthy person or company that can do customized insurance. A manuscripted insurance policy may not be run-of-the-mill, but they can be created. You may be able to get protection in case you lose your coins.
5. The laws surrounding I.T. and cryptocurrency change regularly. You may want to find an attorney for the state you live in to discuss how recourse can work.
Update on 11/24/23
HODL refers to Hold On for Dear Life. HODLers do not time the market or actively trade.
Protecting the recovery seed is essential for getting your cryptocurrency if your wallet is damaged. There are cryptocurrency wallet recovery plates made with titanium and steel capsules that can help protect your cold seed storage for your crypto wallet.
To learn more about insurance of digital assets, see the following links:
- https://www.forbes.com/advisor/investing/cryptocurrency/crypto-exchange-account-insurance/#:~:text=Self%20Insurance%20Options&text=%E2%80%9COne%20of%20the%20protections%20people,unauthorized%20party%20steals%20your%20coins
- https://www.investopedia.com/crypto-insurance-5441920
- https://www.cnet.com/personal-finance/crypto/can-you-insure-bitcoin/
- https://www.marketwatch.com/story/if-your-crypto-is-stolen-youre-mostly-on-your-own-these-steps-can-help-prevent-that-from-happening-11670259699
- https://cryptocurrencyinsurance.io/
- https://originstamp.com/blog/are-crypto-wallets-insured-everything-you-need-to-know/#:~:text=You%20can%20have%20insurance%20protection,one%20exchange%20to%20the%20other
- https://www.sec.gov/oiea/investor-alerts-and-bulletins/exercise-caution-crypto-asset-securities-investor-alert
For Europeans, the platform/company Iconomi.com can allow you to buy crypto or learn more; they may or may not have a way to ensure the holdings.