Black Americans Saw Crypto As Path to Wealth Now Bear Brunt of Decline – Business Insider

Black Americans Saw Crypto As Path to Wealth Now Bear Brunt of Decline – Business Insider

Updated: 3 months, 6 hours, 33 minutes, 6 seconds ago

Black Americans Saw Crypto As Path to Wealth Now Bear Brunt of...

It’s been a difficult last few months for the entire cryptocurrency industry, but Black Americans are among the groups that have been particularly impacted. 
As of September 2021, 18% of Black Americans overall had invested in, traded, or used a cryptocurrency, compared to 13% of white Americans, according to a Pew Research poll of over 10,000 US adults.
When it comes to investors, in January an Ariel and Charles Schwab survey of 2,000 Americans found 25% of Black investors owned cryptocurrency, compared to 15% of white investors. In June, a Kansas City Federal Reserve report found Black Americans were more likely to own cryptocurrency than stocks or mutual funds, whereas white Americans were most likely to own stocks. 
“We saw the same thing happen with the internet bubble, when we saw many African American first-time investors chasing hot internet stocks,” Ariel Investments founder John W. Rogers told The Atlantic. “So many people made so much money over the last seven or eight years, and it is natural to fall into the trap of chasing what worked yesterday.”
Given many Black Americans’ exposure to crypto, as well as the fact many hopped aboard late — investing at higher prices than their peers — these investors have been particularly impacted by crypto’s decline over the past year. Following the downfall of Sam Bankman-Fried and FTX in November, cryptocurrency trading volumes plummeted 50%. Since last year, crypto’s market cap has lost nearly three-fourths of its value, with bitcoin and ethereum, both down nearly 75% from their record-highs in November of 2021.
While the stock market has fallen considerably as well, and could fall further, the S&P 500, for instance, has a track record of going up in the long-run. Cryptocurrency’s value as a long-term investment, however, remains in question, meaning it’s less clear whether buying the crypto dip will turn out well for anyone.
Years ago, most Black Americans were much less likely to own cryptocurrencies than white Americans — but they’ve grown in popularity in recent years. A report from the Federal Reserve Bank of Atlanta gave several potential reasons why.
First, some Black investors may see crypto as a way to close the racial wealth gap. Per the report, the median Black households’ wealth was roughly $24,000 in 2019, compared to over $188,000 for the median white household. The report pointed to a survey in which 27% of Black investors said they expect a 20% or higher annual return from cryptocurrencies — only 12% of white investors said the same. 
Some investors may trust cryptocurrency more than traditional financial institutions. An April Ariel and Charles Schwab survey found 28% of Black Americans distrust banks, compared to 18% of white Americans. 
“If traditional finance has worked for you, you see crypto as risky,” former Obama administration appointee Cleve Mesidor previously told Insider. “You see it as speculative. For those of us who have been locked out, traditional finance is risky.”
Others may be drawn to crypto’s accessibility for investors without a bank account or substantial credit history. The endorsements of various athletes, celebrities, and politicians have likely had some influence as well. 
The Kansas City Fed’s report referenced a Harris Poll that found that 58 percent of survey participants who had heard of cryptocurrency thought the industry’s advertisements were effective at encouraging people to invest in crypto. 

Check out: Personal Finance Insider’s picks for best cryptocurrency exchanges
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