Cryptocurrency has been touted as the key to building black wealth. But critics say the investment is too high a risk.


Samson Williams was working in the mortgage lending industry in 2014 when a colleague convinced him to invest in cryptocurrency.

Williams didn’t know much about cryptocurrency at the time, but decided to invest just over $200 to see where it would take him.

“Nobody knew what it was,” Williams said. “But it would have changed the world. So I drank a lot of crypto Kool-Aid.”

Cryptocurrency—decentralized digital money like bitcoin and ethereum—will gain momentum among black investors in the coming years. As the buzz grew, Williams cashed out in 2020 and bought his mother a house. He had learned enough about cryptocurrency to know it was time to get out.

“I’m done gambling,” said Williams, now an assistant professor of law at the University of New Hampshire.

Despite his gains, Williams worries that savvy investors are promoting cryptocurrency to black Americans as the key to financial inclusion and closing the wealth gap without fully explaining the risks.

A study published earlier this year by Charles Schwab and Ariel Investments found that black Americans are more likely than white Americans to invest in cryptocurrency. The study highlights data showing that black investors are less likely than white investors to believe that cryptocurrency is a risky investment, despite the extreme volatility of cryptocurrency, black people, according to the study, are also more likely to make investment decisions based on on social media or other less credible sources.

The disparity makes black investors disproportionately vulnerable when the cryptocurrency market crashes. Critics argue that black Americans lag behind their white counterparts in financial literacy, which they say is key to making smart cryptocurrency investment decisions. Yet social media influencers, black celebrities, athletes and conference organizers continue their efforts to attract more black cryptocurrency investors by touting their own financial gains.

“Cryptocurrencies don’t solve the cost of living, they don’t solve unemployment,” Williams said. “Black people are so impatient and so hungry for financial inclusion and economic opportunity that by default we are more ripe for exploitation.”

But seasoned investors say cryptocurrency is attractive to blacks for many reasons. These include low barriers to entry, as there are no credit checks or income requirements; equal opportunities for success regardless of race or generational wealth; and many merchants accept cryptocurrency as a form of payment.

Successful black investors say it’s important that potential investors are educated on how cryptocurrency works so they can make smart decisions about how to invest their money.

Cryptocurrency is essentially money that is bought, sold and exchanged online. Unlike the US dollar, cryptocurrency is not regulated by the government, but instead operates on a decentralized system called the blockchain.

The goal is for cryptocurrency investors to buy it at a low price, wait for the value to rise, and then cash out their profits. When the demand for a cryptocurrency increases, the value goes up. If values ​​fall or the market crashes, investors lose money.

There are many different types of cryptocurrency. Bitcoin, which has been heavily promoted by celebrities and athletes, is one of the most popular due to its low transaction fees and ease of use.

Cryptocurrency has also gained popularity in the black community due to success stories.

For example, Terrence Leonard invested $2,000 in 2019, and by 2021, his cryptocurrency investment grew to $1 million. A year earlier, he was able to buy a house in Washington when he sold some of his cryptocurrency to pay the mortgage and make a down payment. He hopes to eventually sell more cryptocurrency and pay off the mortgage.

Leonard said becoming a millionaire doesn’t happen overnight and requires dedication and a willingness to study the market.

“It’s going to be scary and you’re going to be nervous because there’s money at stake and a lot of times people invest more money than they can afford to lose,” Leonard sad. “But you have to take the plunge. Treat it as you would your other interests.”

However, some researchers are skeptical about the cryptocurrency.

Algernon Austin, director of race and economic justice at the Center for Economic and Policy Research, called cryptocurrency a “get-rich-quick scheme.”

Austin said that investing in cryptocurrency can be harmful for people who have no general experience with investing because the market is so volatile.

Austin said low-income black families shouldn’t bet their money without getting guidance from a financial advisor.

“Most African-Americans went into cryptocurrency because the values ​​were high, so that means people are losing money,” Austin said. “And we’re talking about a low-wealth population losing wealth, that’s not a good thing. This is the riskiest investment you can make.

But crypto strategists and successful investors insist that investing will help black people advance financially.

According to the Federal Reserve, the median net worth of a white family is $188,200, compared to $24,100 for a black family.

Charlene Fadirepo, a Bitcoin advisor, said black Americans have long been denied fair access to wealth due to systemic racism. Fadirepo pointed to home ownership being lower in the black community because banks have historically denied mortgages to black families.

Fadirepo said the cryptocurrency offers a level playing field for all investors.

“This is our attempt at a fair financial ecosystem,” Fadirepo said.

Fadirepo, who plans to speak at a conference next month that educates attendees about cryptocurrency and connects black investors, said she encourages potential investors to invest only what they can afford after paying for basic necessities. Part of that requires creating a budget with your extra funds, she said.

“This is about responsible and smart investing,” Fadirepo said. “If you’re unable to invest, if you have significant debt, if you have credit challenges, maybe your first step is to focus on that.”

Leonard said many black Americans feel empowered by cryptocurrency because they have an equal shot at wealth.

Leonard said there are fewer systemic barriers – such as credit checks – to getting crypto loans as there are with bank loans. Investors can use their crypto assets as collateral in exchange for liquid funds. As long as investors maintain the collateral ratio and repay the loans, they get their cryptocurrency back at the end of the term.

“It opens the door to equality,” Leonard said. “There are no long-standing cryptocurrency institutions to set the rules.”

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