Have you ever seen a black swan? Probably not. They’re not common (unless you’re in Australia), and we’re more accustomed to white swans worldwide. That’s why, since 2001, the writer and mathematician Nassim Nicholas Taleb has used this rare animal to describe outlier events, often negative, very impactful, and almost impossible to predict. That’s the ‘Black Swan Theory’.
The term doesn’t differ that much in the cryptocurrency realm. A Black Swan Event in crypto is an unexpected and rare event that has a huge impact on the market, often causing extreme price crashes or major disruptions. As we’ve said before, these events are usually unpredictable, but they may seem obvious only in hindsight. Examples include major exchange collapses, sudden regulatory crackdowns, or yes, a global pandemic.
Besides the price volatility, a sudden event like this can spread fear and uncertainty, causing many to sell their holdings, reducing liquidity. Governments might respond with stricter regulations, affecting businesses and users. If trust in the market weakens, adoption could slow down, making it harder for cryptocurrencies to reach widespread use. However, Black Swan Events don’t tend to repeat themselves – that’s why they are difficult to predict.
Previous Black Swans in Crypto
The COVID-19 pandemic was a major Black Swan Event that impacted global markets, including crypto. In March 2020, as fear spread, investors rushed to sell risky assets,
In 2022, the Terra (LUNA) crash and FTX bankruptcy were two of the most devastating Black Swan Events. Terra’s algorithmic stablecoin, UST, lost its peg (it wasn’t stable anymore), wiping out billions of dollars and collapsing the entire ecosystem. Later that year, FTX, one of the largest exchanges, went bankrupt due to fraud and mismanagement (and likely as a side effect of Terra, too), further damaging trust in the industry. Both events led to stricter regulations and made investors more cautious.
That’s the thing with Black Swan Events. They’re often devastating enough to make everyone learn from previous mistakes and make efforts (and laws) so that they don’t happen ever again. The European Union, for instance,
Future Black Swans in Crypto?
While price predictions are never fully reliable, Black Swan events are even more unpredictable. Analysts can study markets and news, forming their own theories and guesses, but nothing is certain—no one can truly see the future. However, some preventive measures are always available.
To protect themselves from Black Swan Events, crypto investors should diversify their portfolios and avoid putting all their funds into one asset. Holding a mix of cryptocurrencies,
Additionally, investors should practice risk management by setting stop-loss orders while engaging in speculative trading, and only investing what they can afford to lose. Keeping funds in secure non-custodial wallets instead of exchanges can also prevent losses
It’s also important to remember that cryptocurrencies weren’t created just for speculation. The real value lies in their utility and autonomy. Instead of chasing price movements, users should focus on projects that offer them some real-world benefits. For example,
