MacroBeginner#Risk Management#Crisis
Black Swan Event
B
Definition
An unpredictable, rare event that has a massive impact on market prices, such as a major exchange collapse or geopolitical crisis.
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Concept Diagram
Key Takeaways
1
A black swan is an unpredictable event with extreme consequences beyond normal expectations
2
Examples in crypto include the FTX collapse, Terra/Luna depeg, and COVID crash of March 2020
3
Black swans in crypto often cause 50-80% drawdowns within days or weeks
4
Risk management strategies like position sizing and diversification aim to survive black swan events
Practical Example
In May 2022, Terra's UST stablecoin lost its peg and collapsed from $1 to $0.02 within days — wiping out $60B in value. This black swan event caused contagion across DeFi, triggering Celsius and Three Arrows Capital bankruptcies.
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Related Terms
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Stop LossAn advance order to sell an asset when it reaches a specific price point, used to limit loss on a position.
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Hedge (Cobertura)A position taken to offset potential losses in another investment, essentially acting as an insurance policy.
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Risk-On / Risk-OffA market paradigm where investors either flock to high-yield risk assets (Risk-On) or seek safety in cash/gold/bonds (Risk-Off).
Trading
LiquidationThe forced closing of a leveraged position by an exchange when the user's collateral is no longer sufficient to cover the potential losses.
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