Looking for a Black Swan event definition? Read on for a detailed explanation!
What Is A Black Swan Event?
In short, a Black Swan event is an unexpected occurrence that has a significant negative impact on the economy, market, investments, or even the whole world. Such events are rare and often unpredictable, which means that it’s hardly ever possible to prepare for them.
What You Need To Know About Black Swan Events
The Black Swan event theory allegedly originates from a 2nd-century Latin expression of a Roman poet Juvenal “rara avis in terris nigroque simillima cygno”, which means “a rare bird in the lands and very much like a black swan”. Back in the day when this phrase was first used, it was thought that black swans didn’t exist.
Later on, the Black Swan event term was popularized by Nassim Nicholas Taleb in his book “The Black Swan: The Impact of the Highly Improbable” published in 2007. Taleb identified three key attributes of a Black Swan event:
- Black Swans are outliers that cannot be predicted by past experiences or trends.
- Such events are characterized by an extreme or substantial impact.
- Despite being unpredictable and rare, after the first occurrence of a Black Swan event, it can be explained and even become predictable in hindsight.
As per Taleb, some examples of past Black Swan events include the emergence of the internet, the widespread adoption of personal computers, the fall of the Soviet Union, and the 9/11 attacks.
One of the most prominent Black Swan event examples in the crypto market was the collapse of the Mt. Gox exchange in 2014, which resulted in the loss of nearly 850,000 Bitcoins, worth over $450 million at the time.
The platform filed for bankruptcy shortly after, but the event’s impact spread way beyond the exchange, affecting the entire crypto market and shaking the confidence of many investors.
