4 tips on surviving Black Swan events in crypto market
how you can insure your future against unexpected calamity
Hey everyone! 👋
Considering the events from the last few days, we thought it would be a good time to re-visit some of the best things you can do, as a trader and as a human being, to insulate yourself from Black Swan events. While a massive crypto exchange going insolvent is only the most recent example of a Black Swan, Black Swans can exist across all different realms – personal, political, environmental, and more. Because of that, we’re going to walk you through some tips discussing how you can insure your future against unexpected calamity.
1.) Don’t keep all your eggs in the same basket.
This one is glaringly self-evident following FTX’s recent troubles, but spreading your assets out among custody providers is an excellent hedge in case any of them have solvency issues. That way, you’re always protected against single-provider risk. Various global governments have tried to take steps to mitigate this (FDIC insurance , financial regulation), but nobody looks out for your interests like you do. Make sure you’re in a good spot.
Never keeping your assets in one place also applies to asset class and geography. Own a lot of property in a single region? You’re suddenly exposed to natural disasters that could hit the area, drastic political changes, and more. Only own a single asset class? Maybe the macro situation just changed against you quickly and it’s all worth a lot less than you thought.
Diversity is the name of the game, not only from a position perspective, but from a total risk perspective. Where are you vulnerable?
2.) Keep some cash on hand 💵
This one is also self-evident for those who are currently unable to access their funds as a result of the recent turmoil, but keeping cash on hand in order to cover short term expenses is a life saver should you ever need it. To some, getting laid off is a great example of a personal black swan event, and something that could set someone back years in their personal finances. Make sure you’re in a position that you’re not financially stressed if something abnormal happens to your regular, everyday life.
3.) Carry no liabilities 🏦
While some purchases in our lives often necessitate the use of debt, the strongest-positioned people during a crisis are those who are not beholden to others financially. Considering that most Black Swans often cause all sorts of financial damage to their victims, having liabilities can cause undue additional stress that removes options from people who would otherwise be able to take advantage of the conditions. Also, those with a strong financial position are often those best able to improve their own standing when bad situations strike, buying up assets at prices that would normally never be available. Debt can prevent this level of flexibility, and therefore in order to reduce risk, you shouldn’t carry any.
4.) Keep some assets on hand, in person. 🪙
This tip is for broader, more macro-scale black swan events like extended power outages, communications network failures, meteor strikes, war, and other things that would typically fall into that category.
But, in a broader regional or global societal collapse, having assets on hand is the best thing you do for yourself. In a situation where you’re unable to access the broader societal infrastructure to which we all buy in, having a backup on hand where you live is really the ultimate insurance blanket. Whether this is cash, gold , seeds or food, don’t get caught without a plan.
We realize this isn’t the most fun topic to talk about, but if you follow these tips, it’s likely you’re much better insulated against all of the disasters and misfortunes the world can throw at you.
Stay safe out there!
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