Why Some Black Investors Still “Hold” Crypto Despite Winter, FTX

The cryptocurrency bear market hasn’t exactly scared off some black investors, who initially embraced the sector as a means of building wealth.

Why it’s important: Overnight, the knocked-out bitcoin rallied back above $20,000 after weakening for weeks near $16,000. But crypto’s winter has wiped billions off the market capitalization of digital currencies; meanwhile, the unfolding FTX scandal has contributed to a lack of trust in financial institutions, and crypto itself.

• Surprisingly, there are some hardcore enthusiasts who are in no rush to leave crypto, 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 bridge the economic gap, create wealth and democratize the global financial system.

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

Status: To be sure, retail crypto buyers are hardly ignoring the growing risks (it’s hard not to). Still, 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, around the time the crypto craze took off.

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

What they say: Deidra McIntyre, founder of Black People & Cryptocurrency, a discussion group rooted in Bitcoin’s technology, told Axios in a statement that cryptocrime and trading losses dominate public opinion. That could hinder their ability to see crypto’s long-term potential.

• “What’s happening in crypto pre-exists in the financial and corporate sectors, but that [should not be ] an indication of how all crypto business is or should be done,” she said. “We will move in crypto’s knowledge base for fairer, global, trustless, peer-to-peer global transactions.”

Still, investors like Ivan Eberhart are still hodlers. The Atlanta resident bought Bitcoin back in 2017, then invested in Binance coin and Chainlink. Eberhart will continue in the space because of what he sees as a bright future.

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

• The cryptocurrency consultant, who created Blacks in Bitcoin, tells Axios that everyone affected by the FTX debacle knows. Still, Jackson embraces teaching investors about cryptocurrency so they fully understand it, he explained.

Yes, but: FTX’s stunning drop burned many investors, with more shoes to drop. It put celebrities under the microscope for their role in promoting crypto to small investors.

• Algernon Austin, director of race and economic justice at the Center for Economic and Policy Research, says Axios is putting too much emphasis on crypto’s positives for black investors, rather than its (high) risks.
• “I suspect the high proportion of black investment in crypto is this very heavy marketing of crypto, often by black celebrities. The difference we see with crypto and more traditional investments is…that crypto has been very, very aggressively marketed.”

Bottom line: With mistrust of crypto growing among investors of all races, black crypto buyers are like everyone else: Struggling to figure out their next move. And although interest is high, it is not clear whether it will continue.