Black Swan Event: How Does It Apply to the Crypto Market?

If you're interested in crypto or investing, there's a chance that you've heard someone talking about "black swan events." Though this term might sound like it's describing cute animals, the reality is a lot grimmer. Black swan events are certain types of catastrophic occurrences that come with disastrous consequences. If you want to protect your assets, it's essential to understand what a black swan event is and why it happens.

Key Takeaways:

• A black swan event is an unforeseen and extremely rare event that has severe consequences for the economy.
• There are three defining prerequisites for a black swan event: it’s statistically unlikely, has an extreme impact and is easy to rationalize.

What Is a Black Swan Event?

A black swan event is an unforeseen and extremely rare event that has severe consequences. It often causes significant economic damage and can be difficult to avoid. Though it's almost impossible to predict, in hindsight the consequences of a black swan event often appear obvious or inevitable.