A black swan event describes an event that happens unexpectedly and has a significant impact.

The origin of the black swan event can be traced back to a Latin discourse by the Roman poet Juvenal, who lived in the 2nd century. The poet Juneval's statement is as follows:

“rara avis in terris nigroque simillima cygno”.

This expression means "this is a rare bird in this land and it looks very much like a black swan." The black swan phenomenon is based on this phrase. It is also a concept popularized by Nassim Nicholas Taleb. First associated with an event in the 17th century, when a Dutch explorer discovered a black swan in Western Australia at a time when Europeans believed there would never be a black swan.

Nassim Nicholas Taleb explains the black swan phenomenon in terms of three main criteria. These main criteria are as follows:

• The event is an outlier. There is no evidence that such an event was possible in the past.
• The event has an extreme impact. Black swan events can have an unexpectedly large impact, shaking up the existing order.
• People tend to give retrospective explanations for why the event was predictable and explainable.

While the concept of a black swan often carries a negative connotation, some black swan events can be positive. For instance, the rise of the internet can be considered a black swan event that changed the world for the better.

Nassim Nicholas Taleb emphasizes that what people do not know is more important than what they do know. According to Taleb, the world is more random and unpredictable. Major and unexpected events are the ones that shape the world. But such events are impossible to predict.

What Is Black Swan Event in Cryptocurrency?

In the cryptocurrency markets, a black swan event is a concept that refers to any situation that unexpectedly affects life. The concept of a black swan is often used in the cryptocurrency markets. The uncertainties and emerging developments caused by the black swan effect may tend to create FUD in the cryptocurrency market.

Users make their decisions and adjust their investments accordingly, knowing that a black swan event may occur. In an environment of uncertainty, investors may react by selling cryptocurrencies or buying cryptocurrencies with fiat money. Large-scale black swan events that affect the entire world are an important factor in risk management for cryptocurrency investors. In other words, investors manage their risk by taking such developments into account. The potential for black swan events to occur can affect investors' strategies and decisions in the cryptocurrency markets. Therefore, cryptocurrency traders keep an eye out for black swan events. Traders monitor the markets and make more careful decisions during periods of uncertainty.

What Is Black Swan Event in Exchange?

Black swan events in exchange are typically unexpected, and unpredictable and often have a major impact on the market. Such events often occur as events that statistical models cannot predict or are considered low probability. Therefore, black swan events can cause large fluctuations, rapid depreciation, or crashes in financial markets.

However, some people argue, based on statistics, that black swan events occur more often than expected. According to this view, events in stock prices more often have a heavy-tailed distribution.

What Are Examples of Black Swan Events?

Looking back, there have been several significant black swan events. Here are some black swan events:

• 1997 Asian financial crisis
• Dotcom collapse
• September 11 attacks
• 2008 global financial crisis
• Brexit

1997 Asian Financial Crisis

The 1997 Asian financial crisis was a series of currency devaluations that began when Thailand converted its baht into US dollars and affected many Asian markets. It created a domino effect after Thailand's financial problems spread to other Asian countries. In the aftermath of this crisis, Asian currencies depreciated by as much as 38 percent, and international stocks fell by nearly 60 percent. The Asian financial crisis was characterized by economic impotence and financial collapse in the region.

Dotcom Collapse

Due to the rapid development and increased use of the internet, many internet companies were established in the 1980s and 1990s. However, many of these companies went bankrupt after a while. From 2000 to 2002, several internet companies went bankrupt, causing significant losses for investors. The dotcom crash caused almost a trillion dollars worth of stocks to lose their value.

September 11th Attack

On the morning of September 11, 2001, the attack on the Twin Towers of the World Trade Center in New York caused the NYSE and NASDAQ to close. In the first trading week after the attack, stocks suffered a massive drop and a sharp depreciation. In just one week, the stock market lost over 1.4 trillion dollars. This terrible attack had a profound impact on financial markets and the global economy.

The September 11 attack shook the confidence of investors around the world and created great uncertainty and volatility in financial markets. The closure of major exchanges such as the New York Stock Exchange (NYSE) and NASDAQ limited investors' ability to trade and evaluate their assets.

2008 Global Financial Crisis

The 2008 global financial crisis was triggered by the largest bankruptcy filing in history by Lehman Brothers. Lehman Brothers' bankruptcy filing is considered the largest bankruptcy filing in US history. As a result, more than 25,000 Lehman employees lost their jobs and Lehman's market capitalization lost more than $46 billion. In addition, a total of more than $10 trillion was wiped off the global stock markets.

The global financial crisis caused a major collapse in the financial system and economic contraction. The bankruptcy of Lehman Brothers was a profound shock to the banking and financial sector, felt globally and spread to other financial institutions. The effects of the crisis were manifested in many countries through factors such as rising unemployment rates, debt crises, and slowing economic growth.

Brexit

In June 2016, many were surprised when the British referendum voted to leave the European Union. This decision caused the British pound to fall to its lowest level against the US dollar. Brexit wiped nearly $2 trillion of value from global markets. Brexit created great uncertainty in financial markets and caused economic fluctuations. The UK's decision to leave the European Union has raised concerns about trade deals, investments, and economic relations.

What Is Grey Swan Event?

A gray swan event is a concept used to describe a very significant event whose probability of occurrence can be predicted in advance but whose probability is considered small. In other words, a gray swan event is a risk with a potentially large impact but a low predicted probability of occurrence.