From the beginning, critics of cryptocurrency stressed its instability, while enthusiasts touted it as future of finance. Its supposed anonymity attracted droves of Black investors who typically shied away from Wall Street.
Even usually skeptic filmmaker Spike Lee was calling digital assets “positive, inclusive.”
Crypto has been on the seesaw plenty of times, but many experts say its bubble has finally burst as the bottom has fallen out of bitcoin and other digital currency.
The crypto collapse has hit Black Americans hard. Here are five things to know..
1.Black investors went in hard, are fallen harder
A quarter of Black American investors owned cryptocurrencies at the start of 2022, compared with only 15 percent of white investors, according to a survey by Ariel Investments and Charles Schwab. Black Americans were more than twice as likely to purchase cryptocurrency as their first investment.
2.Cheaper not always better
Some experts say Black investors have used crytocurencies as a way to cheaper way to transfer money to others and to make payments.
“The reason that minorities at a higher rate than others are adopting crypto is precisely because if you’re not already rich, it’s way cheaper to send [USD Coin, a stablecoin asset] than to send a wire,” Brian Brooks, chief executive of blockchain company Bitfury, at the Aspen Ideas Festival, The Financial Times reported. “It’s just cheaper. The entire system is cheaper and faster. It doesn’t have all these entry barriers where you can only get it if you’re already rich.”
3. Black Americans are maintaining investments
Despite the losses, many Black investors are staying invested in the cryptomarket. Black investor Dennis McKinley, 41, for example, has been buying the dip against the advice of his financial adviser. Crypto coins make up about 30 percent of his overall portfolio, along with equities.
“Young black America is just now getting to a point where we have the amount of freedom to have the opportunity to invest in alternative strategies besides just real estate,” McKinley, a small-business owner in Atlanta, told The Financial Times. “I think that it’s important to learn and get out there.”
4. People are now doubting is crypto equals equity for Black America
For Black investors who’ve traditionally faced discrimination in other financial arenas, cryptocurrency has been seen as a path to economic equity and wealth building.
The crash would seem bad for Black investors, but some experts caution against discounting the savvy of Black crypto investors.
“For whatever reason, folks want to paint it as if Black Americans and folks invested in crypto aren’t savvy, and they are savvy,” said Tyrone Ross, a financial advisor specializing in cryptocurrency investing, in a USA Today report.
5.The warnings to Black America were there
Moguldom Nation CEO Jamarlin Martin discussed the risk of cryptocurrency and the crypto bubble back in May 2021 on the GHOGH podcast entitled “The 3 Bs: Bitcoin, Bubbles And Biden.” He addressed all the excitement around crypto.
“There’s a lot of bullishness out there. There’s a lot of excitement. And there’s also a lot of bubble thinking or speculative gambling thinking as if Bitcoin is going to trade one way and it’s almost a guaranteed come up,” he noted.
But he warned of the risks. “What I want to do is share the risk factors for Bitcoin so maybe it could spark some curiosity, in terms of the other side, that you can hold on or be a bull for Bitcoin, but it’s important for us to understand the other side. And of course it’s important to understand the risk factor. So, if folks are going to invest or hold Bitcoin at around $60,000, it would be beneficial to understand the different factors that can send it back down to $4,000 or lower,” he noted.
He continued to explain that one should take heed when there is a bubble, as with the crypto bubble.
“Of course, with any bubble, you have a lot of charlatans and the greed factor kicks in where folks are selling stuff without giving you all the information and so, they’re not really selling it in good faith,” he explained.
“They’re just pumping, pumping, pumping. Bitcoin’s going to go to the moon. Bitcoin’s going to the moon, but, we’re going to get into this, but often the little person at the end of the bubble, when the little person, I’m talking about relative income, folks who don’t have a lot of money to lose, but when the little person, the retail buyer starts to get in at the end of a bubble cycle, they tend to get hurt,” he cautioned. “They tend to get crushed. Of course, the rug is pulled in all these people in the industry, the media, the brokers, the investment funds, they’re all pumping it. But when the rug is pulled, a lot of people get hurt after a bubble.”