When you opt for a deposit or loan in a bank, you generally have the option of taking insurance against it. Insurance acts as a protection for your money invested or borrowed. The cryptocurrency markets currently lack a proper insurance mechanism to protect investors’ funds. So far this year, the crypto markets have seen some deep depression in their performance, with major digital currency assets correcting heavily, some stunned investors even on a zero basis. This has caused many cryptocurrency exchanges to freeze their withdrawals and deposits.
Global on Friday crypto market He was recovering from the heavy fall of his previous seasons. The market cap of global cryptocurrencies jumped 1.21% over the past day and stood at around $870 billion. In June, the crypto market erased its $1 trillion mark.
crypto market leader BitcoinIts dominance is down around 42.44% compared to 44.44% dominance two weeks ago.
Currently, bitcoin trades at $19,400.14, up 1.61% with a market cap of approximately $369.22 billion. While the equivalent Ether climbed 3.3% and was trading around $1,065.76 with a market cap of $129.05 billion.
However, in seven trading sessions, bitcoin has registered a loss of over 8% and ether is down around 12%.
The top 10 cryptocurrencies have registered a sharp drop in their price levels in a week. According to data from CoinMarketCap, Binance (BNB) is down more than 8.3% on a weekly basis, while Cardano is down more than 9.7% on a weekly basis, XRP is down by about 13.5% and Solana is down around 18.5%. Tether, USD Coin, Binance USD and Dogecoin also saw slight declines during the week.
Last month, crypto exchanges such as Binance, Celsius and Coinflex halted their withdrawals and deposits to limit outflows into the crypto markets. The reason behind the cryptocurrency platforms stopping their withdrawals and deposits is that their liquidity has dropped drastically.
It is almost like a common practice now, every time there is a sharp drop in cryptocurrencies, some exchanges freeze their withdrawals.
The latest Three Arrows Capital (3AC) collapse eroded confidence in the crypto markets once again following the infamous Terra Token flash crash that wiped out hundreds of millions of investors’ money. On Monday, crypto platform Voyager issued a notice of default to 3AC of loans amounting to $650 million.
Earlier this week, a court in the British Virgin Islands ordered the liquidation of crypto hedge fund Three Arrows Capital (3AC), after the company suffered major losses in the recent market turmoil. Recently, 3AC liquidated its position after failing to meet margin calls.
The uncertainty surrounding the collapse of 3AC, associated defaults, and the halting of withdrawals of lending platform Celsius as they face potential bankruptcy is causing a vicious cycle on other centralized lending platforms, according to Arcane Research analyst Vatel Lunde. .
Furthermore, Lunde pointed out that increasing withdrawals suggest that users of crypto lending platforms are becoming more cautious amid growing uncertainty in the market, leading to banks and a vicious feedback loop for the lending platform, which The already unresolved pending 3AC is experiencing huge pressure. infection
It is these conditions that make it important for investors to insure against their crypto asset investments. However, in the crypto industry, insurance has not gained traction or has been widely adopted.
Vineet Khandare, CEO and Founder of MyFundBazaar pointed out that from cyber attacks to pulling the rug, the cryptocurrency-sector remains an exposed industry and hence, investors are increasingly looking for ways to protect their assets from exploitation – crypto insurance.
Khandare points out that although the companies that people use to buy and store crypto are somewhat similar to banks, these platforms do not have the deposit insurance that banks or investment accounts have. If the companies that operate these platforms fail, there is no guarantee that investors will be able to recover the value of their crypto – this lack of protection reflects the fact that regulators still keep the crypto industry in check. running up.
The founder of MyFundBazaar said the insurance also serves as a reminder that while crypto platforms may seem safe – some publicly traded companies are – they are operating in an industry with almost no regulations and few safety nets. are not.
In Khandare’s opinion, regulators are still learning the art of approaching crypto – being a purely speculative investment, the deposit insurance and government backing behind those crypto assets is unfair, something every investor needs to understand. What they are doing is not putting money in the bank, but a gamble. Increasing efforts to regulate the crypto industry probably won’t end anytime soon – with all the chaos in the crypto market more people are wondering about the fate of their money. This may not be good news for crypto investors, but it is certainly good news if they are into the fast-growing crypto-insurance business.