Why Some Black Investors Still 'Pocketing' Crypto Despite Winter, FTX

Why Some Black Investors Still ‘Pocketing’ Crypto Despite Winter, FTX

Illustration: Megan Robinson/Axios

The cryptocurrency bear market hasn’t entirely scared off some black investors, who originally embraced the sector as a means to build wealth.

Why it matters: Battered bitcoin surged back above $20,000 overnight after languishing for weeks near $16,000. But the crypto winter has wiped billions off the digital currency market capitalization. ; Meanwhile, the unfolding FTX scandal has contributed to a lack of trust in financial institutions and cryptocurrencies.

  • Surprisingly, some hardcore enthusiasts are not rushing to leave cryptocurrencies and plan to continue investing in the battered sector.

zoom out: In 2020 and 2021, the volatile asset class became a hot topic among black social media users. They saw digital currencies as a way to close the economic divide, create wealth, and democratize the global financial system.

  • The wealth gap with other races, some black investors believe, could be closed by investing in cryptocurrency, according to a Kansas City Federal Reserve report published in 2022.
  • 13% of Americans reported buying or trading cryptocurrency, while 44% of that were non-white, according to a NORC survey at the University of Chicago published in 2021.

Status of the situation: To be sure, retail cryptocurrency buyers are hardly ignoring the rising risks (it’s hard not to). However, black investors are slightly more bullish on crypto than their white counterparts, according to a survey conducted by Ariel Investment and Charles Schwab in April 2022, when the cryptocurrency path accelerated.

  • It showed that 25% of blacks invest in digital currencies, compared to 15% of whites.
  • The study also showed that black traders are “twice as likely to rank cryptocurrency as the best investment choice overall” (8% vs. 4% for whites).

What they are saying: Deidra McIntyre, founder of Black People & Cryptocurrency, a discussion group rooted in Bitcoin technology, told Axios in a statement that crypto crime and trading losses dominate public opinion. That may be hindering your ability to see the long-term potential of cryptocurrencies.

  • “What is happening with cryptocurrencies pre-exists in the financial and business sector, but [should not be ] indicative of how the entire cryptocurrency business is done or should be done,” he said. “We will advance the cryptography knowledge base of more equitable, global, trustless and peer-to-peer global transactions.”

However, investors like Ivan Eberhart they are still hodlers. The Atlanta resident bought Bitcoin in 2017 and later invested in Binance Coin and Chainlink. Eberhart will continue in space because of what he sees as a bright future.

Cryptocurrencies like Bitcoin and Ethereum are a long-term store of value, Edwardo Jackson, CEO and founder of Cinema Draft LLC, tells Axios.

  • The cryptocurrency consultant, who created Blacks on Bitcoin, tells Axios that he knows anyone affected by the FTX debacle. However, Jackson agrees to educate investors about cryptocurrencies so that they fully understand it, he explained.

Yes, but: FTX’s impressive drop burned many investors, and there are still more shoes to drop. He put celebrities under the microscope for their role in amplifying cryptocurrency for small investors.

  • Algernon Austin, Director of Racial and Economic Justice at the Center for Economic and Policy Research, tells Axios that too much emphasis is placed on the positives of cryptocurrencies for black investors, rather than its (high) risks.
  • “I suspect that the high rate of black investment in cryptocurrency is due to this very heavy marketing of cryptocurrency, often by black celebrities. The difference we see with cryptocurrency and more traditional investment is… that the Cryptocurrencies have been traded very, very aggressively.”

The bottom line: With distrust of cryptocurrency rising among investors of all races, black cryptocurrency buyers are just like everyone else: they struggle to figure out the next move. And while interest remains high, it’s unclear if it will continue.

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