{"id":113764,"date":"2022-04-21T15:01:12","date_gmt":"2022-04-21T19:01:12","guid":{"rendered":"https:\/\/ncrc.org\/?p=113764"},"modified":"2023-07-11T14:43:27","modified_gmt":"2023-07-11T18:43:27","slug":"crypto-is-a-risky-bet-for-black-americans","status":"publish","type":"post","link":"https:\/\/ncrc.org\/crypto-is-a-risky-bet-for-black-americans\/","title":{"rendered":"Don’t Bet On Cryptocurrency Curing The Racial Wealth Divide"},"content":{"rendered":"

America\u2019s yawning racial divide is no secret. In 2019, the median wealth of white families was $160,000 \u2014\u00a0compared to just $9,000 for Black families<\/a>.<\/p>\n

There\u2019s been growing interest in finding ways to close this divide. That\u2019s a good thing. But unfortunately, some ideas simply aren\u2019t backed by evidence. One troubling example is cryptocurrency.<\/p>\n

Luminaries like\u00a0Spike Lee<\/a><\/p>\n

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\u00a0have promoted crypto as a way for Black families to grow their wealth.\u00a0Yahoo Finance<\/i><\/a>\u00a0proclaims that \u201cBlack Americans are leading the crypto revolution,\u201d while the\u00a0Washington Post<\/i><\/a>\u00a0says \u201cmore people of color are turning to cryptocurrency.\u201d<\/p>\n

A University of Chicago poll<\/a>\u00a0suggests that nearly 44 percent of the Americans who own crypto are people of color. Many stories also mention a Harris poll claiming that\u00a023 percent of all African Americans<\/a>\u00a0have invested in crypto.<\/p>\n

Those are impressive figures, but they may overstate the case. A\u00a0Morning Consult<\/i><\/p>\n

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\u00a0poll found that a modest\u00a08 percent<\/a>\u00a0of crypto owners are African American. And even for most of them, the numbers don\u2019t seem to add up to real wealth.<\/p>\n

Collectively,\u00a0African Americans would need an extra $10 trillion<\/a>\u00a0to enjoy a share of America\u2019s wealth that\u2019s proportional to their population. But according to\u00a0one survey<\/a>, the median crypto investor holds just $191 worth of crypto.<\/p>\n

That\u2019s not going to close a $10 trillion gap anytime soon.<\/p>\n

Several new stories have profiled an African American crypto millionaire named\u00a0Terrance Leonard<\/a>. In 2019, the story goes, Leonard invested in crypto and saw strong returns \u2014 so strong that\u00a0he cashed out his 401K<\/a>\u00a0and invested tens of thousands of dollars more. Eventually, he became a millionaire.<\/p>\n

Leonard\u2019s story is meant to convey that anyone can become a crypto millionaire. But upon further exploration, it shows the opposite.<\/p>\n

Leonard was a software engineer.\u00a0The average base salary<\/a>\u00a0of a software engineer is $125,000 \u2014 far higher than the\u00a0median household income<\/a>\u00a0in the United States, and higher still than median Black income of just $46,000. Yet even with that extra disposable income, Leonard still needed to cash out his 401K to make a substantial investment.<\/p>\n

It worked out for him. That\u2019s great. But few financial advisors would endorse cashing out your long-term savings for a risky investment.<\/p>\n

In fact, things could have gone much differently for Leonard. He sold much of his crypto to\u00a0buy a home in 2020<\/a>. If he\u2019d stayed in until the crypto market crashed this January,\u00a0wiping out over $1 trillion<\/a>, he could have lost big.<\/p>\n

The truth is, crypto is riskier than more traditional investments. And as crypto coach Carlos Acevado\u00a0advises<\/a>: \u201c\u2019Never risk money that you are not willing to lose.\u201d<\/p>\n

The African American community has very little that it can afford to lose. It\u2019s hard enough for families to pay their rent, buy their groceries, and keep up on bills. Risky investments with scarce resources are a bad bet for community economic development.<\/p>\n

There are better ways to close the racial wealth gap while giving a leg up to Americans of every color.<\/p>\n

Universal health care, fairer taxes on the wealthy, and expanded community credit options like postal banking would all reduce the racial wealth divide. Starting small, government-backed trusts for new babies of all races could\u00a0reduce the gap by tenfold all by itself<\/a><\/p>\n

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.<\/p>\n

Crypto is a fascinating technology that could bring much change to the world. But when it comes to making our country more equal, public policy is a much sounder investment.<\/p>\n

 <\/p>\n

Dedrick Asante-Muhammad is NCRC’s Chief of Membership, Policy and Equity.<\/em><\/p>\n

Gerardo Sanchez Herrera Morro is an intern with NCRC’s Membership, Policy and Equity team.<\/em><\/p>\n

Photo by Amjith S<\/a> on Unsplash<\/a> <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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