What You Need to Know About The ‘Black Swan’ Risk In Crypto Trading


Over the last decade, the Crypto trade market has been the most disruptive. While the market and its elements create space and opportunities for even larger investment activity, there is always something uncertain about the Crypto trade market.

The reason for this apprehension is because of its decentralized nature and immutable transactions. Also, Cryptocurrency has narrow exit points. However, with that being the case, the Cryptocurrency industry has still been the most disruptive in the past decade.

The Crypto trade market is growing rapidly. Experts are making several speculations about the official site and how the Crypto industry will change in the future. Even with its strong performance in 2020, some educators believe that the Cryptocurrency industry is going through a Black Swan Event.

What Is Black Swan Event?

It is an unforeseeable event beyond the normal calculation or expectation. Generally, this kind of event is followed by severe consequences. Black Swan events are rare in the trading industry. However, no matter when these events occur, results are not good.

There are no way people can predict when the Black Swan event will take place. The things we expected least are the very nature of the Black Swan event.

Characteristics of A Black Swan Event

There is no way in which a Black Swan event can be predicted. It sure has certain characteristics that help you recognize the Black Swan Events.

  • Black Swan Events Are Outlier: Events that happen out of the normal realm of understanding and could not have been predicted by the past events.
  • Followed Severe Consequences: The event leaves a severe impact on society.
  • Predictable After Events Occurred: These types of events are predictable once the event has occurred.

The Black Swan event happens out of the ordinary. However, once the event has occurred, all the other related events become predictable.

What Does Black Swan Event Mean for The Traders & Investors?

Is there a way to prepare yourself for these kinds of events? No! The theory behind this phenomenon is not to predict when the Black Swan event will occur; instead, prepare yourself to fight the event once it occurs.

It means disregarding the most forecast and prediction, especially long-term investments. Investing with Black Swan in mind is bearish by nature.

Is Bitcoin A New Black Swan?

Speaking of recession 2008, it was inevitable that Bitcoin would rise in the market. The 2008 recession showed people that traditional financial structures are on their last leg. Following that year, in 2009, the first Bitcoin was mined. That market to start a new era of the financial system.

During its initial years, Bitcoin was labelled as a currency used for illicit purposes. However, with time, Bitcoin cleared its name and has established a reputation in the market as one of the most invested digital assets.

The introduction of Bitcoin in the market happened at a curious time when people were in utter disgust with the banking sectors and traditional financial structure. This makes experts believe Bitcoin to be the next Black Swan.

Here are the criteria that will prove that Bitcoin has the potential to become the next Black Swan.

  • Event of Surprise: Bitcoin had an element of surprise when it was first introduced in the market.
  • Event Has Major Effect: Since it’s launched, Bitcoin has slowly gained momentum in the market and become the most invested digital currency.
  • The Later Events Become Much More Predictable: Bitcoin’s recognition was bound to happen. The financial structure was crumbling down and slowly moving towards a financial crisis. Hence, Bitcoin’s rising popularity was a given.

Take Away

In conclusion, we can see that Bitcoin easily satisfies all the three given conditions to be considered Black Swan event. Seeing the data, we can say that Bitcoin is surely the New Black Swan. However, whether it is good or bad, time will tell.

What do you think? Is Bitcoin a good Black Swan or bad? Do let us know.

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