Black Swan: Unpredictable Disasters in the World of Cryptocurrency

When Nassim Taleb was writing about black swans, he probably did not foresee how accurately this concept would reflect the chaotic nature of the cryptocurrency market. These rare, destructive events that come out of nowhere turn everything upside down and leave us bewilderedly searching for explanations post factum.

In the young and unstable crypto market, black swans appear with terrifying regularity, causing price fluctuations that can wipe out fortunes in a matter of hours. Personally, I have had to witness these cataclysms unfold in real time.

When the world turns upside down

Let's recall some of the most devastating examples:

• COVID-19 Pandemic - a global shock that initially caused cryptocurrencies to crash along with traditional markets
• FTX Collapse - when one of the whales in the industry suddenly turned out to be a house of cards, taking billions of dollars from investors with it.
• The Collapse of LUNA/UST - an algorithmic stablecoin that turned out to be nothing more than a mathematically complex financial pyramid.
• Chinese bans - periodic repressions by the Chinese authorities that caused panic among miners and traders.
• Bitcoin swings of 2021 - a drop from $64,000 to less than $30,000, leaving many in a state of shock

Destructive Consequences

When a black swan appears, the consequences can be catastrophic. Liquidity evaporates exactly when it is needed the most. Trust, this fragile foundation of cryptocurrencies, is shattered to pieces. Major players, with cold calculation, buy up assets for a pittance, while small investors panic and sell at huge losses.

I have seen people lose their life savings due to the inability to foresee the unforeseeable. The irony is that after each such event, “experts” explain why it was “obvious” and “inevitable.”

How to Survive in the Age of Black Swans

My strategy is simple: never fully trust any project or platform. Diversify not only among different crypto assets but also across different asset classes in general. Keep a significant portion of your capital in stablecoins or traditional assets to seize opportunities when others panic.

Keep an eye on the news, but don't react impulsively. Often the first wave of panic is the worst time to make decisions.

And most importantly: be prepared for the fact that the next black swan is already on the horizon, even if no one sees it. In the world of cryptocurrencies, it is not a question of “if”, but a question of “when” it will appear.