What Is a Black Swan?
A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.
Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight.
I don't even know if it's fair to call these events Black Swans anymore in crypto considering they are extremely common and predictable but I guess from the viewpoint of your average crypto investing genius they are unforeseen, so we'll stick with that term.
Recent Black Swans
- Terra Luna meltdown - May 5-11, BTC price drops over 25%. Nail in the coffin for 3 Arrows Capital. 3AC failure domino effect takes out Celsius and Voyager.
- Celsius bankruptcy - Rumors June 7, withdrawal freeze June 13. BTC price down over 27% in that week.
- FTX bankruptcy - Starts November 6, BTC drops ~22% in a week. The dominos are still falling, more to come. All eyes on Gemini and Genesis currently.
Potential upcoming Black Swans
- Greyscale Bitcoin Trust liquidation - Currently trading at under 50% the value of the underlying assets since it's managed by the parent company of Gemini/Genesis which are insolvent after FTX collapse. Greyscale BTC has current holdings of roughly $10.8 billion or around 633,000 BTC and roughly $4 billion in other crypto, the majority of which is ETH. If Greyscale were forced to liquidate it would put immense sale pressure on the market.
- MTGox reimbursement - Some part of 141,686 BTC that has been off the market for almost a decade will reenter the system likely sometimes in early 2023. It is unclear how much of this will immediately be sold. Many crypto top minds say all the MTGox recipients are "old school" crypto bros unlikely to sell in a bear market but the ATH back then was about $1250, so everyone from that era is at worst looking at a 1400% gain. There's also
- Tether collapse - If (or IMO when) this happens it will be the Black Swan to end all Black Swans. The entire crypto market revolves around the Tether stable coin and if the house of cards collapses everyone in the market is in huge trouble from top to bottom.
- Binance collapse - By far the largest crypto exchange, the effects of insolvency would be catastrophic to the entire market. Recently rumors of insolvency have swirled around the exchange with breaking news they may have failed to pass an audit attempting to prove their solid financial backing.
- Bitfinex BTC Open Longs - This one is a sleeper to a lot of people who follow this space casually and ties in closely to Tether. Many say this relationship is part of a conspiracy that has been manipulating the price of BTC for years, with shady money passing between the two firms being used to cover massive losses and Bitfinex and inflate the underlying assets used to artificially back Tether. Regardless of any of that I want you to look at this chart. https://www.tradingview.com/symbols/BTCUSDLONGS/ A lot of people will tell you that is Tether and Bitfinex "buying the dip" using highly leveraged longs to attempt to artificially prop up the falling price of BTC. Regardless of if that true or not there are around 40K of open leveraged long positions opened during the May crash at an average of around $35,000 and another 10K positions during the June crash at an average of around $25,000. Then add on top the 55K other open long positions and the fact any of them opened in the past 5 years is red and that's a lot of heavy bags. At some point those positions will have to be unwound, should that happen quickly due to market conditions the results could be rather violent.
Probably missing quite a few, lots of good choices though.
What do you think will cause the next 20% or greater drop in BTC/crypto price?
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