A software developer lost all of his savings after investing in cryptocurrencies twice. Yet, he continues to advocate for it among Black people and hopes to rejoin.
After attending a cryptocurrency workshop sponsored by rapper Jay-Z at the public housing development where the hip-hop sensation grew up, a recent college graduate and a single mother are experimenting with bitcoin.
Nevertheless, the mistaken hope that cryptocurrencies would aid her family in Ethiopia’s war-torn Tigray area has disillusioned a former executive at a cryptocurrency exchange.
All were attracted by the notion of cryptocurrency as a means of accumulating wealth outside of established financial systems, which have a long history of racial discrimination and disregard for the interests of underprivileged populations. Nevertheless, the collapse of cryptocurrency over the past year has thrown a blow to that narrative, igniting a discussion between supporters of its future and detractors who assert that false advertising and celebrity-fueled excitement have lured unwary individuals into a risky and unproven asset class.
Silvergate Capital Corp. and Signature Bank, two banks that supported cryptocurrencies, also failed this month, complicating the situation. For cryptocurrency businesses that relied on banks to exchange digital currencies for cash, their failure was a setback. Yet, the crisis helped support Bitcoin, the first and most well-known digital currency, by repeating the mistrust of the banking system that was a contributing factor in the emergence of cryptocurrencies.
After attending Bitcoin Academy, a workshop supported last summer by Jay-Z and Jack Dorsey, co-founder of Block Inc., the parent company of mobile payment system Cash App, Mariela Regalado, 33, and Jimmy Bario, 22, neighbours at the Marcy Houses complex in Brooklyn, started investing $20 or $30 in bitcoin every two weeks or so.
The mother of a toddler and educational consultant Regalado said, “I don’t view it as something that’s going to, you know, take me out of Brooklyn and buy me a $2 million mansion in Texas. But if it does, I support it wholeheartedly.
The popularity of cryptocurrencies, which are still owned by a tiny fraction of Americans, grew during the COVID-19 pandemic because low interest rates made borrowing money and trading in risky assets more alluring. Prices reached their pinnacle in 2021, and it was simple to buy digital coins thanks to a constellation of apps, exchanges, and even ATM-like crypto machines.
Nevertheless, the downsides of cryptocurrencies were vividly apparent after values fell precipitously in 2022, wiping out millions of dollars’ worth of investments and triggering a wave of bankruptcies and layoffs at exchanges, lenders, and other businesses. Since cryptocurrency is not governed by a single institution, it lacks protections like deposit insurance in addition to its volatility. The industry is vulnerable to fraud, hacking, and scams because it is mostly unregulated.
The foundation of cryptocurrencies is a decentralized ledger, typically a blockchain, which enables peer-to-peer transactions without the need for a third party like a bank or government. According to Terri Bradford, a payment specialist at the Kansas City Federal Reserve who has studied cryptocurrency’s popularity among many Black investors, that continues to appeal to many people who encounter obstacles to traditional wealth-building avenues like homeownership, higher education, or the stock market.
Although we have seen what has happened, it doesn’t seem like many people are turned off by crypto, Bradford said.
According to surveys conducted by the Pew Research Center in 2021 and 2022, compared to 13% of white adults, 20% of Black, Hispanic, and Asian U.S. adults had purchased, exchanged, or utilized cryptocurrencies. Bradford’s study, which looked at information from the Pew Research Center and the Board of Governors of the Federal Reserve System, discovered that while white investors are more likely to hold equities or mutual funds, black investors are more likely to own cryptocurrency.
In order to support minority developers in the industry and embrace blockchain technology’s promise to build more equitable systems in banking and other fields, black and Hispanic crypto aficionados have created social media groups, published books, and hosted summits.
Yet, through expensive sponsorship arrangements with athletes and celebrities, crypto businesses also sought to attract a larger market of retail investors. Several of these deals were directed specifically towards Black and Hispanic customers by promoting cryptocurrency as an economic equalizer.
Making fun of “old money” as “exploitative,” “oppressive,” and “white” and praising cryptocurrencies as “good” and “inclusive,” Spike Lee stars in an advertisement for Coin Cloud, a firm that manufactures ATMs for cryptocurrencies and has filed for bankruptcy.
For inexperienced investors, this kind of high-profile enthusiasm readily obscures crypto’s disadvantages, according to Tonantzin Carmona, a Brookings Institute fellow who studies the impact of cryptocurrency on minority populations.
Carmona believes that the marketing of cryptocurrencies to racial minorities is an example of “predatory inclusion” similar to that of payday loans and subprime mortgages, dangerous products that promise access to financing that is otherwise out of reach.
A marginalized group or society that has historically been denied access to goods, services, or opportunities suddenly learns that they may have access to an alternative, according to Carmona. Yet this access frequently comes with restrictions that negate the advantages or worsen the security situation for these very same communities.
Rahwa Berhe originally began investing in cryptocurrencies when she was a graduate student at the University of Washington in Seattle investigating alternative financial products. As a Black woman, the Chicago native struggled to find support while directing a compliance team for digital assets at an exchange for four years.
It’s like you combined all the finance bros and tech bros into one group. She didn’t know where She belonged, admitted Berhe.
Her disillusionment increased when crypto couldn’t send money to her relatives in Tigray from 2020 to 2022 because to the country’s lack of infrastructure and access to electricity, which prevented transfers. She attempted to raise these issues with certain members of the crypto community, but they regarded her as “negative” on social media, where posters were smugly happy that the hashtag #eth, which stands for Ethiopia, was exposing people to the virtual currency Ether.
Berhe is now investigating how decentralised web tools might be used to archive Africana artefacts with a Stanford University research lab. She is finished with cryptocurrency at this time.
It was wonderful until it wasn’t, according to Berhe.
Crypto proponents contend that underrepresented groups should have access to a rich asset class that isn’t going away. Many others think there will soon be another boom and compare last year’s crash to the dotcom bust of the 2000s, which didn’t ruin the IT industry but instead weeded out bad actors and boosted winners like Amazon.
According to Andre Mego, the programme manager at Bitcoin Academy, cryptocurrency is a simple method to introduce financial literacy to a community where many people find ideas like wealth-building investments abstract and out of their reach. Each participant received $1,000 in bitcoin at the end of the summer session, the majority of them via Cash App, which started trading bitcoin in 2018.
Mego said, that gives us motivation when we discuss accessibility. Because everyone considering investing might believe that will be a significant development in the future. I have to put a lot of money aside for it. I’m not sure if this is something I can do. Am I even participating in this discussion?
Although having graduated from Lafayette University this spring with a degree in economics, Bario claimed that Bitcoin Academy’s workshop at the Marcy Houses complex was his first real introduction to personal finance. He claimed that when he was a child, his family relied on his father’s income as a cab driver in Honduras, making investment opportunities unrealistic.
I’ve always believed that as soon as you get your cheque on Friday, it’s time to spend it, said Bario, a former player who is now a football coach.
Omid Malekan, a professor at Columbia Business School who specializes in blockchain and cryptocurrencies, expressed his hope that the most recent meltdown will disabuse people of the notion that bitcoin is a safe way to make rapid money. Malekan, however, asserted that the crypto sector needs more diversity, people should be inspired to seek careers in inventing what he believes will be the financial technology of the future.
It takes more than just price declines to scare away individuals drawn to cryptocurrencies by their technological capabilities and the prospect of a more open, universal financial system, according to Malekan.
The software developer, Tyrone Norris, claimed that he had to learn the hard way to be cautious when buying cryptocurrency.
Norris, a native of Washington, D.C., studied computer programming in high school and attended college courses, but he was unable to enroll full-time due to financial constraints. He has travelled the country working as a contractor, never owning a home or participating in an employer-sponsored retirement plan.
When Norris first made the decision to invest in cryptocurrencies, he looked about on exchanges and settled on MANA, a token that powers the 3D virtual world Decentraland, because he regarded it as a sign and it matched his ex-name. girlfriend’s
He lost all of his money—$4,000—and went all in. Once his MANA investment doubled, he began placing bets on the coins he believed to be the most rewarding. But one exchange turned out to be a hoax, while a New Zealand-based exchange suffered a cyberattack that cost millions of dollars. Norris lost everything he had invested, but two years later he returned with an additional $5,000. Once more, he saw it soar, only to plummet when the 2022 “crypto winter” descended.
I had no idea what I was doing because I was a novice. I was putting my crypto in risky situations,” Norris admitted.
He is currently taking a vacation from software development to concentrate on creating a hip-hop gaming project that is funded by cryptocurrency. Norris claimed he has no regrets because investing made him aware of the blockchain’s potential.
