The black swan has arrived, is your wallet ready?

What the hell is a black swan?

In simple terms, a black swan event is something that is almost impossible to happen, but once it does, it can leave the market in shambles.

The concept comes from the real black swan discovered in Australia in 1697 - before that, Europeans thought swans were only white, until the appearance of the black swan debunked that notion. NYU professor Taleb used this idea to develop the “Black Swan Theory,” which describes unforeseen disasters in the financial markets.

Black swan events typically have three labels:

• Caught off guard: Beyond the scope of conventional predictions
• High lethal power: Economic, financial, and political collapse across the board.
• Hindsight is 20/20: After the event, everyone says “I saw it coming all along”

How ruthless were those black swans in history?

The internet bubble burst in 2001

Tech stocks were blown up to the sky, and the Nasdaq index plummeted by 78.4%. What was the result? The unemployment rate in the tech industry soared to 17.8%. It wasn't until afterward that people realized - those companies were not worth that price at all.

2008 subprime mortgage crisis

The Federal Reserve did not anticipate this. The then-chairman Alan Greenspan later admitted, “This kind of crisis was simply not predictable.” During the Great Recession, the unemployment rate doubled to 10%, 3.8 million homes were foreclosed, investment bank Lehman Brothers went bankrupt directly, and 25,000 people lost their jobs overnight.

Economists now understand clearly - loose lending policies combined with crazy subprime mortgage securitization, this is a ticking time bomb.

Flash Crash in 2010

A British futures trader named Salau manipulated the market with algorithms, causing the stock market to evaporate nearly $1 trillion in a single day. This event directly led to the creation of the “circuit breaker” firewall.

A Collection of Black Swans in the Cryptocurrency Market

Intensive bombardment in recent years:

In May 2022, the Terra ecosystem exploded

• Hundreds of billions of dollars evaporated from the cryptocurrency market in just a few days.
• BTC fell from $39,000 to $29,000

Celsius Crypto Bank Suddenly Suspends Withdrawals

• Announce bankruptcy, the market collapses again
• BTC dropped from 28000 to 19000 during the week

FTX Flash Bankruptcy (This is the harshest one)

• Once the second largest exchange collapsed without warning.
• Investors can't withdraw billions of dollars.
• BTC dropped straight from 21000 to 15000

These are all classic black swans - no one expected them, but they all caused devastating blows.

How to defend?

The black swan will definitely come, just don't know when. What investors can do:

1. Diversify Your Holdings — Don't go all in on a certain coin or exchange.
2. Diversification of Asset Allocation — Allocate a portion to stocks, gold, real estate, and cryptocurrency.
3. Don't put all your eggs in one basket — Exchanges should be diversified, and banks should also be diversified.
4. Reverse Thinking — When a black swan event strikes, good projects may be oversold, and this is when bottom fishing might yield significant profits.
5. Mental Preparation — Make the worst-case scenario plan, so when it happens, you won't be flustered.

Bottom Line Thinking: There will definitely be risks in the future that you can't imagine. But rather than worrying unnecessarily, it's better to prepare for defense now.