What is a "black swan" in the market and can it be curbed

A "black swan" is a hard to predict and a rare event that nevertheless has significant consequences. The theory was invented by American mathematician and economist Nassim Taleb in 2004. Almost all significant scientific discoveries, historical and political events, art and cultural achievements, such as the development and introduction of the Internet, World War I, the stock market crash in the United States in 1929, the collapse of the Soviet Union and the global economic #crisis of 2008 are "black swan" type events.

Silicon Valley Bank (SVB) declared bankruptcy.

Against this background, the cryptocurrency market also collapsed. #USDC #Stablecoin has been detached from the dollar after the closure of Silicon Valley Bank, where Circle held $3.3 billion in collateral. Bloomberg writes that this is the largest bank collapse in the U.S. since the 2008 crisis. The reason was the withdrawal by the technological startups of their funds from the bank accounts. The financial regulator in California said that the bank will get a temporary administration and insured depositors will get their money no later than Monday morning. According to Bloomberg, SVB had about $209 billion in total assets and $175 billion in deposits as of December 2022.

In the screenshot you can see the U.S. bank situation now. (March 11, 2023)

How do investors prepare for black swans?

#BlackSwans can affect almost all areas. Sometimes events occur almost instantaneously. So how do you protect yourself from their influence?

In his book, Taleb wrote that the best way to mitigate the negative influence of black swans is not to try to predict them. According to the author, it is instead necessary to develop a stable and sustainable plan that will help reduce the probability of such an event or mitigate its consequences.

Diversify capital by asset type and location

Accept that the next black swan is bound to happen

Take advantage of the opportunities that black swans provide

In 2017-2019, the economist spoke positively about #bitcoin , calling it the first organic currency. He saw the strength of digital money in the fact that it could not be controlled by central banks.

However, Taleb later changed his mind. The economist said that we can't rely on bitcoin - it won't save money from inflation. According to Taleb, cryptocurrency is not a hedging tool and does not protect against geopolitical risks. "Bitcoin is not an insurance against geopolitical events, but just the opposite."

Black Swans and other threats really do come down to risk management and its basic applications. A good formula to apply is RISK = THREAT X VULNERABILITY X CONSEQUENCE. We can use this formula combined with new advanced computing to better predict, synthesize data, and mitigate extreme events. It is never too late to start planning.

On March 20, Circle’s Director of EU Strategy & Policy, Patrick Hansen, published an article on the Circle blog discussing the impact of the Markets in Crypto-Assets Regulation (MiCA) on the European Union’s (EU) crypto industry.

The article highlights how MiCA will change the way crypto companies operate in the EU, providing them with the ability to serve the entire EU market with just one license. Before MiCA, crypto companies had to comply with the regulatory frameworks of each of the 27 member states, leading to higher costs and limiting their competitiveness compared to US or Asian counterparts.

MiCA’s implementation is expected to have several positive impacts on the EU crypto industry, including increased competitiveness and market share for regulated businesses, institutional adoption and activity, and potentially becoming a huge opportunity for economic and technological revival in the EU.

However, the success of MiCA will depend on the implementation standards and enforcement practices developed by EU supervisory authorities in the next 12-18 months. Some of MiCA’s passages carry the risk of burdening industry participants, and their full effects will only become apparent once technical implementation standards provide practical operational guidelines.

MiCA has the potential to become a globally adopted regulatory standard like the GDPR is today for privacy. The EU market is the largest internal market in the world with 450 million relatively wealthy consumers. By the sheer size of its market, MiCA will likely persuade many companies worldwide to adopt its operating standards, possibly on an international scale, in order to maintain globally streamlined operations and products. The article also notes that the longer the US regulatory vacuum for crypto-assets persists, the greater the global impact of MiCA standards will be.

In conclusion, the MiCA regulation could represent a positive boost for the EU crypto industry and the EU economy overall, but its success is highly dependent on the development of practical implementation standards. MiCA could set global standards for crypto regulation, but its practical success is the only thing that will matter at the end of the day.

#MiCA #EU #Circle #Stablecoin #azcoinnews

This article was republished from azcoinnews.com

สาย Stablecoin คงต้องลุ้นกันต่อ! คณะกรรมการกำกับดูแลธนาคารระหว่างประเทศ (BCBS) เสนอเปลี่ยนกฎเกณฑ์การจัดการ Stablecoin ให้เข้มงวดขึ้นเป้าหมายหลักคือลดความเสี่ยงของ Stablecoin ต่อระบบการเงินโลก โดยเน้นไปที่:ทุนสำรอง: ต้องมีทุนสำรองเพียงพอหนุนหลัง Stablecoin ทุกหน่วยการออกโทเค็น: กำหนดเพดานการออกโทเค็นใหม่การไถ่ถอน: ต้องแน่ใจว่าผู้ถือ Stablecoin สามารถไถ่ถอนเป็นสินทรัพย์พื้นฐานได้อย่างสะดวกวิเคราะห์:การเปลี่ยนกฎครั้งนี้ส่งผลต่อวงการ Stablecoin แน่ๆ บางเหรียญอาจอยู่รอด ยิ่งเหรียญที่มีทุนสำรองแข็งแกร่งยิ่งได้เปรียบแต่สำหรับเหรียญที่ไม่แข็งแรงอาจต้องปรับตัว หรืออาจหายไปจากตลาดเลยก็ได้#Stablecoin #Regulation #BCBS #Cryptocurrency #Siamstr

Hedging is a vital risk management approach employed by both individuals and institutions to mitigate potential losses stemming from investments. Drawing a parallel with acquiring insurance, consider owning a residence in a flood-prone region — obtaining flood insurance is a prudent step to safeguard the asset from the perils of flooding.

In the spheres of financial and cryptocurrency markets, the mechanism of hedging operates in a similar vein. It entails making a strategic investment aimed at diminishing the vulnerabilities posed by unfavorable price fluctuations in an asset.

The application of hedging within the cryptocurrency realm mirrors its utility in traditional financial markets. This entails assuming a position in a correlated asset that is anticipated to move inversely to the primary position.

Nonetheless, it’s imperative to comprehend that hedging strategies come hand in hand with their own set of risks and costs. Option premiums can prove to be substantial, futures contracts may impose constraints on potential profits, and the reliability of stablecoins hinges on the issuer’s financial stability. Although diversification can aid in diffusing risk, it may not be foolproof in thwarting losses.

In essence, hedging stands as a critical tool for safeguarding investments across varied domains, including the dynamic arena of cryptocurrencies. While its principles share common ground with traditional financial practices, a thorough evaluation of associated risks and expenses is paramount when implementing hedging strategies in the ever-evolving landscape of digital assets.

#WebGTR #Hedging #cryptocurrency #Market #Stablecoin

Visa said it has already moved millions of USDC to Solana and Ethereum blockchains to settle fiat-denominated payments through VisaNet.

Read more on: https://thecryptobasic.com/2023/09/05/visa-launches-stablecoin-settlement-on-solana/

#Solana #Ethereum #Stablecoin #crypto #crypto2023