How Is the Protective Put Strategy Similar to Buying Insurance on a Crypto Holding?

The Protective Put strategy is similar to buying insurance because the premium paid for the Put Option is the cost of insuring the underlying cryptocurrency against a price drop. The Put's strike price acts as the deductible, setting the minimum price at which the investor can sell their asset.

Just like insurance, the investor pays a non-refundable premium to secure a guaranteed payout (the strike price) if the insured event (a significant price drop) occurs, limiting the maximum loss.