- Pompliano argues that bitcoin’s unique properties make it an attractive insurance asset for several reasons.
- He says that bitcoin provides insurance against a variety of risks, including currency devaluation and sovereign default.
- Bitcoin critics however point to things like the volatile nature of crypto assets and low adoption as reasons why it cannot be a global insurance company.
Anthony Pompliano, a venture capitalist and popular Bitcoin Advocate, argues that BTC can be considered as the biggest insurance company in the world.
The investor says the idea was proposed to him at a breakfast meeting with two investors, whose talk suggested that the world’s largest insurer might not “look” like a general insurer.
Is bitcoin the world’s biggest insurance company?
That was the question asked by two investors at breakfast yesterday. In this piece, I’ll uncover why they may be right in their analysis.https://t.co/nSS4xDnuou
— Pomp 🌪 (@APompliano) May 19, 2023
Why bitcoin can be insurance
Pompliano’s Argument, published in latest edition The Pomp Letter is based on the idea that bitcoin provides insurance against a variety of risks, including currency fragility, sovereign default, undisciplined monetary and fiscal policy, and economic censorship.
,Just as there are different insurance policies for different purposes, bitcoin is different things to different people. And as most policyholders never want to access their insurance, most bitcoiners realize that bitcoin’s success legacy will come on the heels of major issues in the financial world.,
The entrepreneur listed several reasons on what makes bitcoin truly insurance.
He says bitcoin is a one-time purchase and has some advantages. Unlike traditional insurance policies, BTC does not require ongoing premiums. Bitcoin comes cheap at a premium if you buy early and is much more expensive if done later.
the second reason is cryptocurrency Is a decentralized asset that is not under the control of any single institution, which makes it more reliable than traditional insurance companies. This has also been inversely related to mayhem in traditional finance, the latest example being when the price of BTC soared in the midst of the US banking crisis.
Furthermore, bitcoin is a global asset that can be accessed by anyone, anywhere in the world, making it more accessible than traditional insurance products. As an insurance, its programmatic nature means that holders are not required to submit claims and wait for someone to decide whether or not to honor them.
Bitcoin critics may disagree, but…
Although bitcoin continues to see massive adoption around the world, the argument highlighted by Pompliano has not escaped crypto critics.
For some, BTC is too volatile to be considered a reliable insurance asset. Another argument is that the digital asset has not achieved the level of adoption that would make it a practical insurance option for most people.
Pomp says the idea is still viable, especially with the potential that bitcoin could be an insurance against events such as inflation and economic collapse. Most of these incidents have been largely “abimatable”.
,No insurance company is going to write you a valid policy against high inflation. They will not write you a policy against government seizure of your property. Insurance companies historically have not covered hyperinflation or economic collapse.The investor argued.
He also believes that there is no need to hold large amounts of BTC in order to make a profit. Putting around 1-3% of an investment allocation in bitcoin can be an effective hedge against the negative impact of economic risks.