The Intelligent Insurer #8 — Risk of Technical Flaws Increase Amid Bullish Momentum
In a classic display of FUD (fear, uncertainty, and doubt), the Bitcoin market liquidated a lot of small and midsized investors before crossing the $50,000. Last week, we covered the Elon Musk effect and how that pushed Bitcoin above $48,000. Naturally, investors eyed up the $50k level. Many anticipated BTC price to achieve this level before a considerable pullback or any trend reversal. This spurred speculators to take leverage and catalyzed roughly $1.5 bln in long-side liquidations when a pullback occurred. After a brief pullback, Bitcoin continued to rise in price until it conquered the $50,000 mark as was initially expected by a myriad of investors.
While insurance solutions can’t cover market volatility, investors can use them to protect against other forms of risks. The recent bullish momentum has spurred more companies to adopt blockchain and experiment with implementing the technology. Such rapid developments can oftentimes result in technical flaws and vulnerabilities. In the latest Intelligent Insurer, we detail how Insured Finance can help protect against the possibility of such technical flaws. We also highlight how the recent bullish market conditions have spurred a new wave of adoption and development.
Bitcoin’s Brief Pullback
On February 15th, Bitcoin’s price recorded a sharp drop. In less than four hours, the price dropped from $49,048 to $45,914. The extent of this drop is not unusual in the markets. Rather, it was the events surrounding the drop and the expectations of investors that generated the interest.
While investors were expecting a final push towards $50,000, a decline occurred. This drop catalyzed roughly $1.5 billion worth of liquidation on the long side, illustrated by the black arrow below.
More Institutional Investors Push Bitcoin Higher
Not long after the sharp drop, the trend reversed again for Bitcoin, continuing in a bullish direction. More enterprises, like The Motley Fool, are entering the BTC market, with others showing significant interest. Enterprise adoption supports the sustained bullish sentiments that have prevailed in the Bitcoin market so far in 2021. The interest from enterprises extends beyond simply investing. Several companies are looking to integrate blockchain technology in their business processes. Twitter’s Chief Financial Officer, Ned Segal publicized the company’s plan to adopt Bitcoin as a form of payment to employees and vendors should they demand it.
Similarly, Bank of New York Mellon, the world’s largest custodian bank has publicized its plans to provide an integrated service for digital assets. The bank will allow digital currencies to pass through the same financial networks it uses for traditional holdings.
Safeguarding Against Uncertainties
However, with such rapid adoption and experimentation underway, the odds of technical failure and other risks also rise. Bullish market momentum spurs experimentation and adoption. Racing to experiment with new technologies can easily lead to vulnerabilities.
A tailored insurance solution like Insured Finance will help investors protect against such blindspots. Investors can comfortably keep up with the bullish momentum by investing in the latest digital assets while also minimizing their exposure to technical flaws.
About Insured Finance
Insured Finance is a decentralized, peer-to-peer insurance marketplace. Built on the Polkadot blockchain, Insured Finance users can request customized insurance on a wide variety of digital assets. Those that fulfill requests earn premiums and can earn a competitive return on their capital. Claims are fully collateralized and settled instantly.