A Black Swan Strategy is an investment approach designed to profit from rare, unpredictable, and high-impact market events. This strategy typically involves allocating a small portion of a portfolio to instruments that yield significant returns during extreme market downturns or unexpected crises. It functions as a form of extreme risk mitigation, seeking large gains from events considered highly improbable but devastating if they occur. The strategy accepts frequent small losses in exchange for infrequent, substantial profits.
Context
In cryptocurrency news, discussions of Black Swan Strategies often arise during periods of extreme market volatility or following unexpected regulatory announcements. Investors might adopt such strategies to protect against systemic risks within the digital asset ecosystem, such as major exchange failures or widespread protocol vulnerabilities. The efficacy of these strategies remains a constant topic, with proponents pointing to their protective qualities and critics noting their cost during stable market conditions.
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