Williams didn’t know much about cryptocurrency at the time, but decided to invest a little over $200 to see where it would take him.
“No one knew what it was,” Williams said. “But he was going to change the world. So he was drinking a lot of crypto Kool-Aid.”
Cryptocurrency, decentralized digital money like bitcoin and ethereum, would gain momentum among black investors in the coming years. As the hype grew, Williams cashed in 2020 and bought his mother a house. I had learned enough about cryptocurrency to know it was time to get out.
“I was done playing,” 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.
“Cryptocurrencies don’t solve living wages, they don’t solve unemployment,” Williams said. “Black people are so eager and thirsty for financial inclusion and economic opportunity that by default we are ripe for exploitation.”
But seasoned investors say cryptocurrency is attractive to blacks for many reasons. Among them are the low barriers to entry because there are no credit checks or income requirements; equal opportunity for success regardless of race or generational wealth; and many merchants accept cryptocurrency as a form of payment.
How does cryptocurrency work?
Successful black investors say it’s important to educate potential investors about 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 of cryptocurrency investors is to buy it at a low price, wait for the value to rise, and then collect their profits. When the demand for cryptocurrency increases, the value increases. If stocks fall or the market crashes, investors can lose money.
Cryptocurrency has also gained popularity in the black community due to success stories.
For example, Terrance Leonard invested $2,000 in 2019 and by 2021 his cryptocurrency investments grew to $1 million. The previous year, he was able to buy a house in Washington DC when he sold some of his cryptocurrency to pay for real money and 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 said. “But you have to dive in. Treat it like you treat any of your other interests.”
A “risk investment”
Some researchers, however, are skeptical of 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 gamble with their money without getting guidance from a financial advisor.
“Most African-Americans got into cryptocurrency because the values were high, so people are losing money,” Austin said. “And we’re talking about a low-wealth population losing wealth, that’s not good. It’s the riskiest investment you can make.”
“A fair financial ecosystem”
But successful cryptocurrency strategists and investors insist that investing will help black people get ahead financially.
Charlene Fadirepo, a Bitcoin advisor, said black Americans have been left out of fair access to wealth because of systemic racism. Fadirepo noted that home ownership is lower in the black community because banks have historically denied mortgages to black families.
Fadirepo said cryptocurrency provides a level playing field for all investors.
“This is our chance for a fair financial ecosystem,” Fadirepo said.
“This is a responsible and smart investment,” Fadirepo said. “If you’re not in a position to invest, if you have significant debt, if you have credit problems, 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 like 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 that set the rules.”