White Swan Events: What Are They?

A white swan event is a foreseeable occurrence that can be anticipated or predicted based on existing facts and projections. Economists often forecast the onset of inflation or financial collapse in a country. Similarly, crypto players forecast the future of a certain asset by studying all of the events taking place in the ecosystem.

A recession is a classic case of a white swan occurrence. Rising unemployment, inflation, and negative GDP growth are all indicators of a recession. The World Bank has declared that the world economy is on the verge of stagflation, a type of economic crisis that shares certain features with recession.

While no one can predict the precise timing, it is likely that economic crises (white swan occurrences) will happen at some time. That is one of the reasons why the world is rapidly adopting cryptocurrencies. They have shown to be an effective inflation hedge in countries where native currencies have crashed.

What are Black Swan Events, Then?

The downfall of UST was the black swan event that heralded the arrival of crypto winter. Furthermore, the market’s failure to rebound significantly reinforced this judgment. Investors asked how long the crypto winter would endure.

Because of the presumed rarity of black swans in comparison to white swans, when assets suffer occurrences that should occur with very low probabilities (e.g., between 4 and 5 standard deviations), they are commonly referred to as black swan events.

A Grim Example of a White Swan Event

The magnitude of COVID-19 has rendered the global economy crippled, prompting numerous governments to implement a second lockdown in response to the renewed spike in infection numbers. This was a catastrophic strike for both the crypto world and the global economy in general, with a chance of happening. But, it is impossible to concentrate on the recession when the worst result of this epidemic is the annihilation of a substantial section of the world’s populace.

Yet, given the high possibility of the COVID-19 risk event, it does not qualify as a black swan event. There was a “might occur” concern even before it happened. COVID-19 was thus a white swan event, an occurrence that was unavoidable.