Can You Get an Insured Bitcoin Wallet?
Bitcoin is risky, to say the least. So, can you actually find an insured Bitcoin wallet?
If you listen to classic investors like Warren Buffett, Bitcoin is one of the most dangerous investments you can make. (Actually, he called it "rat poison.") Dangerous as it is, many people have become Bitcoin billionaires or at least turned a profit off of it.
Much of the risk involved with investing in Bitcoin is the volatility. Some of it, too, also deals with the fact that many people seem to believe that Bitcoin is fundamentally flawed. If you ask cybersecurity experts, though, the potential of theft is what really makes Bitcoin a tough buy.
Bitcoin isn't backed by a company or regulations. If you lose your coins, that's it. You're done. That's why many Bitcoin investors are on a hunt for an insured Bitcoin wallet... but does it really even exist?
Why would people want an insured Bitcoin wallet?
Bitcoin's biggest risk is the possibility that you could lose it to a hacker. It can happen to anyone, even if you store your Bitcoin investments on what is considered to be a highly secured wallet or exchange. (Remember Mt. Gox?)
Even if you think your wallet is safe, anything can happen. Cold storage wallets could be melted in a fire. High security wallets could be hacked. If the coins you had in the wallet were insured, the wallet company would be able to reimburse you for your loss.
Sounds great! So, why aren't there insured wallets?
Insurance costs are all based on risk, and insurers have to charge the masses enough money to cover the cost of losses they'll incur. This means that the price companies would have to pay in order to offer up insured Bitcoin wallets is high.
Like, real high. As in, insuring Bitcoin wallets or a Bitcoin exchange could easily bankrupt the wallet or exchange if it's not well-funded by external groups.
But, that's not the only reason finding crypto wallets is such a difficult task. There's also an issue with insurance companies that needs to be addressed...
Fact: Most insurers won't want to cover Bitcoin wallets.
Insurance companies love some risk, but not heaping loads of it. This is especially true when they really don't have any way to determine who will be hacked, the risk of a hack, or anything similar.
Moreover, with major data breeches, insurers wouldn't have to cover just one leak. Everyone would be affected, and that means that the insurer could easily have millions to pay.
Needless to say, it's not always easy to find an insurer who would be interested in backing a Bitcoin wallet. It's a lot of risk, which is why insured wallets for Bitcoin seem to be so hard to find.
That being said, not all is lost.
The need for insured Bitcoin wallets is definitely there, and as the market would have it, wallet makers have responded. Due to changes in laws regarding Bitcoin, it is possible to find a cryptocurrency wallet that's FDIC-insured.
There's a catch though. The insurance policies that are listed below only insure cash balances. Since Bitcoin and other cryptocurrencies are not government backed, there's no real way to determine its official value.
Most insured wallets will only insure the value of the coins up to $250,000. That being said, most of us won't really carry much more of a balance than that, so it probably will not affect you if you're just starting out.
Here are some of the best options there, rare as they may be.
If you needed any more reasons to open up a Coinbase account, here's one for the masses. People who stored cash in their accounts need not worry about theft of hacking. The cash balances are insured up to $250,000 by the FDIC.
That being said, cryptocurrencies are NOT insured on Coinbase. So, it's still not as good as it could be. Even so, some insurance is better than no insurance.
Another Bitcoin wallet to have become one of the few FDIC-insured Bitcoin wallets on the market is Gemini. Much like with Coinbase, the assets that are backed by the FDIC will only be cash-related. So, if you were hoping for cryptocurrency theft insurance, you'll be out of luck here.
Like Coinbase, Gemini accounts are insured up to $250,000.
Another major wallet, Circle, has become known as one of the better insured wallets for Bitcoin on the net. This wallet, like Coinbase, offers an FDIC insurance policy on cash deposits up to $250,000 in value.
What makes Circle one of the most secure wallets on the net, though, is that it goes beyond FDIC cash insurance. Circle currently remains the only Bitcoin wallet to offer Bitcoin theft insurance. The coverage is comprehensive, and yes, it offers a lot of peace of mind.
There really aren't many others out there—and it seems like the number of insured Bitcoin wallets shrinks daily.
Believe it or not, there was a period of time when there were way more insured wallets available for digital currencies. Wallets like Xapo and BitGo once used to have extremely effective insurance policies backing them.
Unfortunately, due to massive numbers of attacks, many wallets decided it was no longer wise to back Bitcoin and other cryptocurrencies using insurance. Part of the reasons were due to cost, and others were due to the strained relationships with insurers.
We're not sure if there will be a time when cryptocurrencies will be insured in wallets.
The sheer number of thefts and hacker attacks that have been carried out by black hat hackers has made cryptocurrency investments naturally risky. That pattern does not seem to be stopping, either. As a result, it's hard to tell whether the insured Bitcoin wallets that are currently here will still be around in a year or two.
That being said, if demand for insured wallets increases, someone will undoubtedly provide it.
The cool thing about commerce is that people will naturally end up dictating the market, even if the product is hard to make. Assuming that demand continues to spike for insured Bitcoin wallets, it's safe to say that insurers will find a way to make it work.