Bitcoin Volatility — Everything Can Change In A Twinkle Of An Eye

The Intelligent Insurer #7 — Protecting Against Market Volatility

Every investor is concerned about capital protection and security of investment. Insurance policies have filled this gap for so many years in the mainstream financial sector. In the world of cryptocurrencies, capital protection and security of investment is still a subject of concern. Although there are a few solutions that offer decentralized insurance services, there is no diverse, tailored insurance product. Insured Finance is launching a marketplace where users can secure such tailored insurance.

In the latest Intelligent Insurer, we consider the recent spike in volatility in the Bitcoin and cryptocurrency market. With the recent spike in volatility, investors will be seeking ways to protect their downside risk. We further detail how Insured Finance will provide an ideal way to secure coverage against exchange security risk that increases in times of volatile market conditions.

Different Strokes for Different Folks

Volatility is a major characteristic of Bitcoin. The digital currency is still in its early stages of development and has much room remaining for adoption. However, the fact that it jumps to significant volatility levels at the slightest “provocation” means a lot in the industry. Bitcoin volatility means different things to different people.

Traditional investors would primarily carry out long-term analyses and consider both technical and fundamental factors before making investment. These ones will usually secure long-term positions and will not be bothered by short-term market fluctuations. For short and mid-term speculators, things are particularly different. For them, how profitable or not the market turns out depends on the extent of price movements. This category of investors always look forward to market volatility in order to find money making opportunities.

What moves the Bitcoin market varies from time to time. The actions of a single individual or group can make the market do new things. A few factors have been responsible for the increased volatility that the Bitcoin market has exhibited in 2021. As is characteristic of the Bitcoin market, many predictions have been proven incorrect, while some were upheld. However, with the recent volatility, a specific news development can be tied to the jump.

The Elon Musk Effect

Elon Musk is the biggest name in the Bitcoin market at the moment. The South African born CEO of Tesla and SpaceX has been in the news lately, and his utterances and actions are having a direct effect on the Bitcoin market. After the following tweet, Dogecoin jumped from $0.04992 to reach an all time high of $0.0895 in just a few days.

https://twitter.com/elonmusk/status/1357914696645414913

In January, Musk pipped Jeff Bezos of Amazon to become the richest man in the world. With this status, he automatically earns the listening ear of everyone in the investment world. Late in January, Musk updated his twitter bio to simply read #Bitcoin. This singular act caused the price of Bitcoin to rise by about 20%, reaching $38,000 in under one hour. This was after price had retraced to below $32,000 from the then all time high of over $42,000. Since then, Musk has become relatively active on social media, especially on Twitter, where his utterances have seen even cryptos like Dogecoin push north.

On February 8, Tesla announced that it has purchased $1.5 billion worth of Bitcoin and is willing to start accepting the pioneer cryptocurrency as payment. This sent the market flying again, conquering existing resistances and posting a new all time high well above $48,000, before retracing to around $44,750 at the time of writing.

(Source: Tradingview.com)

Chinese New Year Neutralized?

In the previous years, the price of Bitcoin would fall in the weeks leading to the Chinese New Year. The reason for this has been speculated to be Chinese miners selling off their earnings in Bitcoin to fund expenses for the celebration. Many of them may also use the opportunity to recoup fiat currencies for settling other bills like electricity. This time around, despite the sell off, Bitcoin price did not fall.

Instead of Bitcoin price taking a hit as expected, we are experiencing new price levels as history is being created. Events like these remind us of how unpredictable the Bitcoin market can be, and exposes how quickly the Chinese dominance is fading in the Bitcoin ecosystem. Even the current bull run is said to have been driven by the influx of funds from institutional investors from the wetsern world.

Over a short period of time we have already seen how difficult it is to predict the Bitcoin market. The actions of one man, or just a few individuals can send the market into a frenzy. We have also noticed how quickly things can change no matter their previous level of consistency.

Market Uncertainty and Eventualities

Sometimes these developments take the market unaware and service providers like exchanges can be knocked off balance. In the wake of the Tesla Bitcoin purchase news, increased traffic caused Binance network to crash.

Changpeng Zhao, CEO of Binance, acknowledged the situation and commented on his twitter handle. Hitches like these and some others have been the setback for investors aiming to enter the digital assets industry, especially when they consider the security of their investments. Some insurance protocols already offer coverage digital asset holdings held on exchanges, albeit with limited offerings. All of them so far are DeFi protocols with severely restricted offerings.

https://twitter.com/cz_binance/status/1358762501056303106

The arrival of Insured Finance redefines the meaning of insurance in the digital assets ecosystem. This innovative DeFi protocol provides tailored insurance for the unique risk of individual users. This includes exchange hacks and security issues. By using smart contracts on the Polkadot blockchain, users can buy customized insurance policies in a peer-to-peer marketplace, thereby removing the risk of losing their wealth.

Insured Finance keeps you safe and protected from the rapid changes that are common to the Bitcoin and cryptocurrency marketplace. Risk neutralization is the priority of serious investors. Therefore, having a tailored product that is not restricted but supported by instant settlement delivers control into the hands of users. This is the ideal insurance product for participants in the digital asset ecosystem.

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.