WhaleVest｜WhaleVest 100 Compass｜Black Swan Event

What is a black swan?

The term black swan first appeared in the best-selling book "The Black Swan Effect" published by New York University professor Nassim Nicholas Taleb in 2007. It means "the probability of occurrence is extremely low and unpredictable, but it is still events that occurred”.

The origin of black swans comes from before the 17th century. Europeans thought that all swans were white. It was not until 1697 that the first black swan was discovered in Australia, completely breaking people's inherent understanding of swans.

In his book "The Black Swan Effect", Taleb made three clear definitions of black swans:

1. The incidence rate is extremely low

The reason why such events have never happened is because the probability is so low that there is almost no possibility of predicting it in advance.

2. Severe impact

Once an incident occurs, it will have a strong impact on the status quo, and the impact may last for decades.

3. Hindsight

Since it has never happened before and there is no experience to follow, it is only after the event that people can come up with various explanations for the event.

For example, events such as the September 11 terrorist attacks in 2001 and the COVID-19 epidemic in 2020 are all "black swan events" that are unpredictable and have a major impact.

The story of the 312 black swan incident

1. Background and triggering factors:

The outbreak and spread of the COVID-19 epidemic around the world has caused huge impact and panic on the global financial market. Bitcoin has been falling since mid-February 2020, and March 12 became the "Black Thursday" of the cryptocurrency market. Both U.S. and European stock markets suffered heavy losses on this day, triggering investors' concerns about a liquidity crisis and economic recession, and funds were withdrawn from high-risk assets.

2. Global stock market crash:

The U.S. stock market triggered its third circuit breaker mechanism, and the Dow Jones index plummeted nearly 10%, the largest one-day decline since 1987. European stock markets also suffered heavy losses, with the German DAX index and the British FTSE 100 index both falling by more than 10%.

3. Cryptocurrency market collapse:

Bitcoin fell sharply after the US stock market circuit breaker, falling from US$7,800 to US$5,555 in just one hour, a drop of more than 28%. In the next few hours, Bitcoin continued to decline, hitting a low of around $3,800, a drop of more than 52%.Other mainstream cryptocurrencies such as Ethereum, Litecoin, EOS, etc. also plummeted, and the market was bleak.

4. Market reaction and impact:

The speed and magnitude of the plunge are rare in cryptocurrency history. More than US$7 billion in liquidations occurred on global cryptocurrency exchanges, and the total market value fell from US$228 billion to less than US$120 billion, almost halved.

The causes of the 312 black swan incident

From both a macro and micro level, the 312 black swan event had a profound impact on the cryptocurrency market:

Macro level:

1. The superimposed effect of the global financial crisis and the COVID-19 epidemic: The global financial market is facing major challenges, and the impact of the COVID-19 epidemic on the economy has led to a slowdown in global economic growth and increased uncertainty. Large-scale stimulus and monetary easing measures by governments and central banks have triggered excess liquidity and currency depreciation, further exacerbating market pressure and volatility, and also affecting sentiment and expectations in the cryptocurrency market.

Micro level:

1. Giant whale shipment:

Large investors or institutions may choose to reduce their positions when the market panics, bringing huge selling pressure to the market.

2. Leverage Liquidation:

Speculators and asset managers used leverage to operate quantitatively and were unable to withstand the margin pressure when prices fell, triggering a large number of liquidations and pushing prices down further.

3. Deposit is not smooth:

Factors such as Bitcoin network congestion, USDT premium, and insufficient over-the-counter deposits have led to a lack of buying support in the market.

4.DeFi selling pressure:

Large-scale liquidations on decentralized lending platforms triggered a sell-off in collateral, exacerbating selling pressure in the market.

A blow to market confidence:

The 312 black swan event caused serious damage to investor confidence. Many people suffered heavy losses and even lost confidence and exited the market. This has led to a decrease in activity and liquidity in the cryptocurrency market, while also affecting market innovation and development.

Changes to market structure:

The event prompted structural adjustments and improvements in the cryptocurrency market. Some exchanges and platforms lose users due to poor performance, while other platforms gain more users due to stability. At the same time, some new products and services emerged or were verified during this crisis, increasing the diversity and choices of the market.

Implications for the future of the market:

The 312 black swan event provides lessons for the future development of the cryptocurrency market. The market is young and immature, with risks and problems, but it is also full of opportunities and potential. Investors should remain rational, make independent judgments, and use leverage and lending tools with caution. In addition, we should adhere to our beliefs, avoid blindly chasing short-term interests, and be committed to the long-term healthy development of the market.

The 312 black swan event is a major event in the cryptocurrency market, reminding us to respond to market fluctuations with caution and continue to learn and improve. This incident will also push the market to develop in a more stable and mature direction.

Register now for the world’s largest exchange to enjoy the epic bull market: https://www.binance.com/zh-TC/join?ref=19772816