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What Is Black Swan
Black swan event refers to an event that occurs suddenly and has a drastic effect on the market, it causes economic destruction. It’s difficult to predict its occurence.
How Does Black Swan Affect Crypto
The idea of a black swan is frequently used in the cryptocurrency markets. The unpredictability caused by the black swan result may be liable to generate FUD in the cryptocurrency market.
Huge black swan events that influence the whole world are a significant factor in risk management for cryptocurrency investors. The last black swan event that shook the industry was the FTX bankruptcy case. The possibility of Black Swan events to come by can influence investors’ game plan and decisions in the cryptocurrency markets.
How To Prepare For Black Swan Events
Preparing for a black swan event is mainly about not depending more on any given fundings. Whilst a crypto like Bitcoin appears to be too big to fail, there is no denying that a black swan event that could trigger the unexpected can happen. Therefore, it’s important to hedge (preparing for financial risks) by diversifying and expanding your portfolio. Purchasing a number of similar cryptos may not necessarily safeguard you from a money catastrophe. Owning different methods of investments, such as NFTS and options, is wise.
Additionally, investors should consider the possible circumstances that could affect an investment to collapse. For instance, if a crypto’s value is about to be completely backed by a single nation, consequences in that nation alone could create prices to fluctuate to irrecoverable lows. If possible, choose cryptos that are encouraged in multiple places, tradable through multiple exchanges and not restricted to any single asset or management. You should ascertain yourself that a single thing that goes left won’t be sufficient to completely pound your investment.
Finally, one can prepare for a Black Swan event by simply following this basic investment advice: “thou should not invest with money you can’t afford to lose.” While there is the saying that goes “spend money to make money,” never over extend yourself. The smart investors on every occasion keep some finance in reserve, therefore a single financial crisis doesn’t entirely destroy their finances. And as always, it’s important to do your own research.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
