May was the month that cryptocurrencies — the digital darlings touted from Twitter to Reddit, and by billionaires and superstars — plunged to earth.
Bitcoin, the most popular of those assets, lost 19% of its value within a week, dropping to its lowest value since October 2020. Ethereum plummeted by nearly 27%, and some of the so-called stablecoins, pegged to commodities like the U.S. dollar, became nearly worthless.
That shedding was surely visceral for anyone swept up in the crypto craze. But for Black, Hispanic and LGBTQ+ Americans, who are more likely than whites to buy digital currencies, more was potentially lost than dollars and cents.
For investors from communities who’ve traditionally faced discrimination, cryptocurrency has been seen as a path to economic equity. For those who’ve been unfairlydenied a mortgage, or had to jump through hoops to get approved for a business loan, crypto glowed like a golden ticket to generational wealth.
And for some who felt they were too often on the outside looking in, at the stock market, at the staggering wealth of Silicon Valley, crypto presented the chance to be on the front end of a financial boom – for once.
Cryptocurrencies remain an opportunity with a particular allure to young people, who appreciate that there are no gatekeepers and that they can grasp and connect with this assetthrough social media and their peers.
But the recent market decline serves as a sobering reminder that when trying to close a financial gulf createdby systemic racism and other barriers, cryptocurrency can’t be the only solution.
Crypto crash may deter some investors
Tyrone Ross, a financial advisor specializing in cryptocurrency investing, believes that most who’ve put money into the currencies will stay the course, appreciating that they are on the ground floor of a growing asset and mindful that dips in value are inevitable with any investment.
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“For whatever reason, folks want to paint it as if Black Americans and folks invested in crypto aren’t savvy, and they are savvy,” says Ross, who is Black and founder of 401STC, a financial consulting business. “I don’t think it’s going to deter them at all. But it will deter those people just in it for the fad, and that transcends race, creed and color.”
However, Jullian Harrison, 30, a Richmond, Virginia-based business owner, worries that the recent drop will deter less-experienced investors of color not only from continuing to put money into crypto, but from investing in the stock market or even real estate.
“A lot of people I know in my community who were investing in crypto … that’s the first $1,000 they ever invested,” says Harrison, who is Black. “When you go from $500 dollars to $5 and you don’t have that to lose, that does something mentally that may last generations.”
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While only 11% of white Americans say they own cryptos, 23% of Black Americans and 17% of Hispanic Americans own such assets, according to data from Harris Poll that was given exclusively to USA TODAY last year.
Harrison, co-owner of a ball bearings company, says crypto makes up only a small portion of his vast portfolio, which includes stock and real estate. But he plans to take advantage of the recent market dip to buy a lot more of some digital currencies.
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“My goal is to move up to 10%,” he said, “and then I’ll put a hard stop on it.’’
Still, it continues to bother him that crypto can be purchased with the ease and speed of playing a video game. And he says that some novice investors are likely unprepared for the ups and downs that come with investment, particularly one as new and volatile as digital currencies.
He recalled how one of his employees wasn’t interested in putting money in a 401(k) account “but crypto was the thing for him.” His investment of a few hundred dollars quickly multiplied into thousands of dollars in profits.
Then the crypto market plunged, and his employee began to question why he should bother investing at all. He has pulled all of his money out of digital currencies.
“The sad thing is that he was on the right track,” Harrison says, “but it may have been the wrong vehicle.”
Cryptocurrency is paying the bills for some
Many investors are chasing crypto dreams. But for others, crypto is a financial necessity.
Last year, 3% of Americans used digital currency to pay for items or services or to make money transfers, according to a report released this month by the Federal Reserve Board.
While 6%, or roughly 14 million Americans do not have a bank account, 13% of those who used cryptocurrency for transactions were unbanked, and 27% lacked a credit card last year, the report said. Almost 60% of those who used cryptocurrencies to cover expenses earned less than $50,000.
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Many who do not have bank accounts say they can’t afford overdraft and other fees, and they may turn to non-bank money orders, pawnshops, or payday loans to survive. Blockchain technology and crypto assets are often a cheaper alternative, with fees for cryptocurrency transactions typically lower than the cost of intermediary money transfers.
“It’s not surprising we’re starting to see people use it,” says Ramona Ortega, founder and CEO of the financial tech company My Money My Future, who added that there’s a need for additional products built on blockchain technology to benefit unbanked consumers.
But Ortega cautioned that reliance on cryptocurrency can become a problem if you are counting on it to pay your bills “and then you’re seeing that value decline, so now your dollar is worth 70 cents.”
Will crypto ever go back up?
Whether you are a Black or Latino investor who has made cryptocurrency a part of a broader portfolio, or a minimum wage worker using crypto to send money to a distant relative, the new assets have offered financial possibilities and access to groups who have often been dismissed by or locked out of more traditional financial systems.
“I don’t want to see people of color left behind by the crypto market,” Ortega says. “If you bought crypto ten years ago, even at the lows today, you’ll have amassed a lot more money. And I don’t want us to drop out of any asset class that has potential for growth … The way we build generational wealth is we don’t just stick to something we know.’’
But there needs to be stock and other investment vehicles in your portfolio, she says. And you should invest in crypto “only if the other boxes are checked off. You have savings. You have a stable job. You have your 401(k) … You need to know this is your highest risk asset. This is not where you put your retirement.”
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It is understandable why people might want to take a risk on crypto, to give their children and grandchildren financial breathing room, or at least a head start. It also makes sense why someone without a bank account would tap into a currency that allows them to pay bills without racking up steep fees they cannot afford.
But cryptocurrency’s ups and downs make it clear that an investment can become a gamble if you pour in money you cannot afford to lose. And wealth building shouldn’t depend solely on crypto.
The financial industry, which has been heavily criticized for lending practices that have hindered, exploited or hurt Black and brown communities, has made numerous pledges to become more equitable in the two years since George Floyd’s murder spurred protests across the nation. Those institutions must continue to be held accountable.
And financial education — about stocks, about entrepreneurship, about real estate — should be as core to primary education as biology and math.
In the meantime, cryptocurrency continues to beckon.
“Should crypto be a part of your portfolio? Yes, and absolutely,” Ortega says. “If you have money in these coins, now is not the time to be selling them. Now is the time to hold them to see what happens next.”