Cryptocurrency is resonating widely among black U.S. investors

The widespread losses caused by the cryptocurrency crash are even greater among black investors.

A quarter of black Americans own cryptocurrencies, compared to just 15% of white investors, according to a survey by Ariel Investments and Charles Schwab. Black Americans were more than twice as likely to buy cryptocurrency as their first investment.

The value of these investments is imploded. The total market value of cryptocurrency has fallen to below $ 1 billion from over $ 3.2 billion last year. With the fall in digital assets comes a bear market in US stocks.

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Greater exposure of black Americans to cryptocurrencies has made them more vulnerable to the economic downturn, even though their households on average have less wealth.

The lure of creating wealth, enhanced by marketing, has attracted many black investors to cryptocurrencies. Bitcoin’s dollar price has risen 9.300% in five years to reach its highest in November.

Jefferson Noel, 27, said he got his first exposure to crypto in January 2019 when he accidentally invested $ 5 in bitcoin using the Cash App, a payment service.

Jefferson Noel invested $ 20,000 of his savings in cryptocurrency © Calving Productions

“I had no idea what it was and I don’t even remember doing it,” he said.

Last May, his involuntary investment was worth $ 70. The astronomical gain inspired him to follow a friend’s advice to invest $ 20,000 of his savings in other cryptocurrencies, such as dogecoin, instead of more traditional investments such as index funds.

“[Black Americans] I do not want to be left behind anymore, ”said Noel. “As far as I know, the black community sees crypto as a way to level the playing field and get into the game before gatekeepers block others from participating.”

But he is now reconsidering that decision. Persistent losses wiped out over 20% of his crypto investment. He researches mutual funds on the advice of his uncle, but always buys more crypto.

Historically, black investors have tended to be conservative and put more of their money into lower-risk assets such as insurance and savings bonds. Black Americans trust the stock market and financial institutions less than white Americans, according to the Ariel-Schwab study. Other research has linked their fears to decades of discrimination in the financial system.

Jatali Bellanton, author of a personal finance program for young black Americans
Jatali Bellanton sees crypto as a way to compensate for lost opportunities for wealth building

Jatali Bellanton, author of a personal finance program for young black Americans called Kids Who Bank, sees cryptocurrencies as a way to offset wealth-building opportunities that were historically unavailable in real estate and stock markets.

“We don’t like to be left behind when it comes to new technologies,” she said.

The promise of cryptocurrencies as wealth creators has been left behind by celebrity endorsements, endorsements and publicity.

Prominent black Americans, including musicians Jay-Z and Snoop Dogg, boxer Floyd Mayweather, actor Jamie Foxx and filmmaker Spike Lee, have promoted crypto to their communities.

Lee appeared in ads for crypto ATM operator Coin Cloud last year, saying “old money will not get us back; it pushes us down” and “systematically suppresses”, whereas digital assets are “positive, inclusive”.

Last month, Jay-Z announced a partnership with former Twitter CEO Jack Dorsey to launch a “Bitcoin Academy” literacy program at Brooklyn’s public housing complex, where he grew up.

These celebrities have been widely criticized for being paid to sell high-risk investments to people who may not have the resources to deal with the volatility of crypto.

“Ninety-eight percent of these cryptocurrencies were designed to do nothing but extract money from people’s bank accounts,” said Najah Roberts, former financial advisor and founder of the Crypto Blockchain Plug cryptocurrency training center.

“It’s not ‘get rich quick,'” Roberts added. “There are massive targeting ads targeting our community.”

Bellanton said it’s not about advertising, but about the prospect of financial freedom, a lack of investment minimums common to mutual funds, and a sense that blockchain – distributed ledger is more transparent than the big banks that attract new investors .

“The reason why minorities adopt crypto to a greater extent than others is precisely because, if you are not already rich, it is much cheaper to send [USD Coin, a stablecoin asset] than sending a thread, ”said Brian Brooks, CEO of blockchain company Bitfury, at the Aspen Ideas Festival last month. “It’s just cheaper. The whole system is cheaper and faster. There are not all these barriers to access where you can only get it if you are already rich.

Despite the risk of loss, many black investors remain invested in the market. Dennis McKinley, 41, bought the drop against the advice of his financial adviser. He said his cryptocurrencies now make up about 30% of his total portfolio, held together by equities.

“The young black America is just about to reach a point where we have the freedom to invest in alternative strategies beyond real estate,” said McKinley, a small business owner in Atlanta. “I think it’s important to learn and go out.”

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