Cryptocurrency has been seen as the key to the creation of black money. But critics say the investment is too risky.

At the time, Williams didn’t know much about cryptocurrencies, but decided to invest a little over $200 to see where it would get him.

“No one knew what it was,” Williams said. “But it was about to change the world. That’s why I was drinking a lot of crypto Kool-Aid.”

Cryptocurrencies – decentralized digital money such as bitcoin and ethereum – will gain momentum among black investors in the coming years. As the hype grew, Williams cashed out in 2020 and bought her mom a house. He had learned so much about cryptocurrencies that it was time to find out that it was time to get out.

“I was gambled,” said Williams, who is now an assistant law professor at the University of New Hampshire.

Despite his earnings, Williams worries that veteran investors are promoting cryptocurrencies to black Americans as a key to financial inclusion and closing the wealth gap without fully explaining the risks.

A study released earlier this year by Charles Schwab and Ariel Investments found that black Americans were more likely than white Americans to invest in cryptocurrency. The study highlights data that shows that black investors are less likely than white investors to believe that cryptocurrency is a risky investment, despite the extreme volatility of cryptocurrency, with black people making investment decisions based on social media or other factors. are more likely to. less reliable source.
Inequality leaves black investors disproportionately vulnerable when the cryptocurrency market collapses. Critics argue that black Americans lag behind their white counterparts in financial literacy, which they say is the key to making smart investment decisions with cryptocurrencies. Nevertheless, social media influencers, black celebrities, athletes and conference organizers continue to try to lure more black investors into cryptocurrencies, claiming their own financial gains.

“Cryptocurrencies do not address the living wage, they do not address unemployment,” Williams said. “Black people are so eager and so thirsty for financial inclusion and economic opportunity that by default we are more ripe for exploitation.”

But seasoned investors say cryptocurrencies are attracting black people for a variety of reasons. Among them are low barriers to entry because there are no credit checks or income requirements; Equal opportunities for success regardless of race or generational wealth; And a lot of merchants accept cryptocurrencies as a form of payment.

How does cryptocurrency work?

Successful black investors say it’s important to educate potential investors about how cryptocurrencies work 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 in a decentralized system called a blockchain.

The goal of cryptocurrency investors is to buy it at a low price, wait for the price to rise, and then capitalize on their profit. When the demand for cryptocurrency increases, so does the value. If prices fall, or the market crashes, investors stand to 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.

Cryptocurrencies have gained popularity even among the black community due to success stories.

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

Leonard said that becoming a millionaire does not happen overnight and requires dedication and a willingness to study the market.

“It’s going to be scary and you’ll panic because there’s money in the game and a lot of times people are investing more money than they can afford to lose,” Leonard sad. “But you have to dive into it. Treat it like you would treat any other interest of yours.”

A ‘risky investment’

However, some researchers are skeptical of cryptocurrencies.

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

Austin said that investing in cryptocurrencies can be detrimental to those who have no general investment experience because the market is very volatile.

Austin said low-income black families should not gamble their money without getting guidance from a financial advisor.

“Most African Americans got involved in cryptocurrency because the value was higher, it means people are losing money,” Austin said. “And we’re talking about losing assets to the underprivileged population, that’s not a good thing. It’s the riskiest investment you can make.”

‘A fair financial ecosystem’

But cryptocurrency strategists and successful investors insist that investing will help black people get ahead financially.

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

Bitcoin advisor, Charlene Fadirepo, said that black Americans have long been kept out of fair access to money because of systemic racism. Fadirepo pointed to homeownership that is low in the black community because banks have historically refused to mortgage black families.

Fadirepo said that cryptocurrency provides a level playing field for all investors.

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

Fadirepo, which plans to speak next month at a conference that educates attendees about cryptocurrencies and connects black investors, said it would allow potential investors to pay only basic necessities after they pay their expenses. can encourage investment. She said that part of it requires budgeting of your additional funds.

“It’s about responsible and smart investing,” Fadirepo said. “If you’re not in a position to invest, if you have significant debt, if you have credit challenges, maybe your first step is to focus on that.”

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

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

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

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