The black swan event in cryptocurrency: When it suddenly becomes reality

The crypto market is like a “playground” full of instability, where unexpected events can happen at any moment. These events are called “black swans” – a term describing rare, unpredictable phenomena that have a huge impact on the entire market. The concept of black swans was introduced by renowned economist Nassim Nicholas Taleb in his book The Black Swan, and it is perfectly suited to explain the shocks that cryptocurrency investors often face.

What is a Black Swan and Why Is It Hard to Predict?

In the context of cryptocurrencies, a black swan refers to unexpected, unpredictable events that significantly affect prices, liquidity, and market confidence. The most puzzling aspect of black swans is that: immediately after they occur, everyone can “explain” why they happened, but beforehand, almost no one can accurately forecast them.

The crypto market is still very young and heavily influenced by external factors. Unlike traditional markets that have been operating for hundreds of years, cryptocurrencies are still in the discovery phase, where new rules are constantly being rewritten. Therefore, unexpected events happen more frequently than anticipated.

The Biggest Shock Waves in Crypto History

The history of cryptocurrencies is marked by many events later recognized as black swans:

COVID-19 Pandemic (2019-2020): When the pandemic suddenly struck, not only Bitcoin but the entire global economy was disrupted. Bitcoin’s price plummeted by up to 50% within a few weeks, causing great panic among investors.

FTX Collapse (2022): One of the largest and most popular exchanges suddenly went bankrupt. Hidden truths surfaced – poor financial management, using customer funds for personal trading – causing the entire platform to collapse within days. This event not only devalued Bitcoin but also damaged trust in the entire ecosystem.

LUNA/UST Disaster (2022): The Terra ecosystem self-destructed when the UST stablecoin lost its peg, resulting in losses of tens of billions of dollars. The design model had inherent vulnerabilities, but these only became apparent when the market showed signs of weakness.

China’s Mining Bans: China repeatedly issued bans on cryptocurrency, causing continuous market volatility. Every time news from China emerged, Bitcoin and the entire market immediately tumbled.

Bitcoin “Run” from $64,000 to $30,000 (2021): Within a few weeks, Bitcoin’s price dropped from its all-time high by half. It wasn’t a gradual decline but a shock so intense that many investors felt like the world was ending.

How It Works: From an Event to Market Chaos

A black swan has three basic characteristics:

Rarity and Surprise: No one can accurately predict when and how it will happen. This is because the crypto market is still too young to have reliable forecasting models.

Extreme Impact: An event can affect hundreds of projects, millions of investors, and billions of dollars in value. Liquidity can “freeze,” exchanges become overwhelmed, and buying and selling assets become extremely difficult.

Post-Hoc Rationalization: After a black swan occurs, everyone can “look back” and explain why it happened. But before that, there are almost no clear warnings.

Immediate effects include: liquidity disappearing, trust collapsing, and opportunities turning into risks. Large investors may take advantage of low prices to accumulate assets, while small investors suffer from being “caught” with assets sold at extremely low prices.

How to Invest Safely When Black Swans Can Happen Anytime

Although it’s impossible to predict black swans, investors can prepare to minimize damage when they occur:

Risk Management Is a Priority: Never invest all your assets into a single asset. If an unexpected event hits Bitcoin, Ethereum, or any other coin, your portfolio won’t be completely wiped out.

Diversify Your Portfolio: Spread your capital across different projects, asset classes (crypto, stablecoins, traditional assets). Think of it as insurance – you don’t want all your chips in one place.

Always Keep a Reserve Fund: Hold a portion of your assets in stablecoins or traditional assets to be ready to act when opportunities arise. When a black swan strikes and prices fall sharply, you’ll have cash to buy at low prices.

Monitor Early Signals: Black swans often originate from major news – exchange bankruptcies, government bans, or protocol bugs. Stay updated with reputable sources to detect early warning signs.

Have a Worst-Case Scenario Plan: Ask yourself: “What’s the worst that could happen?” and “How much can I lose and still survive?” Having answers to these questions makes you more prepared than most investors.

Black swans will always exist in the crypto market, but what can be controlled is how you prepare and respond. Wise investors are not those who predict unexpected events correctly but those who are ready to endure them.