Crypto Marketing Attracted A Disproportionate Number Of Black Investors. Heres Why.
Bitcoin started the year quite well, gaining almost 40% in January. But that's after losing almost 60% of its value in 2022.
Last year was a difficult year for many cryptocurrency investors with the fall of FTX and other high-profile scandals in the industry. And some of those losses have been particularly significant for black investors.
According to the 2022 Ariel-Schwab Survey of Black Investors, a quarter of black Americans owned cryptocurrency last year, compared to 15% of white investors. By comparison, the survey found that 58% of black Americans and 63% of white Americans own stocks.
"Surprisingly, another thing that stood out to us was that black respondents we asked viewed the stock market as riskier and less fair than their white counterparts," said Ariel Investments director of public affairs Ariel Patrick. "So it fuels their enthusiasm for a shiny new cryptocurrency, and perhaps because it's newer, it has a shorter journey to record with fewer failures."
There are many types of crypto marketing that specifically target black consumers; Super Bowl ads featuring LeBron James talking to his younger self, Spike Lee highlight crypto ATMs, even ads promoting investing in crypto to create generational wealth.
According to Patrick, the campaign has paid off. "Black investors are twice as likely to say cryptocurrency is their first investment, 11% compared to 4% for white investors."
Terry Bradford, a payments specialist at the Federal Reserve System in Kansas City, found additional reasons why black investors are investing more in cryptocurrency.
"A key factor in all of this has been the wealth gap, as well as mistrust in traditional financial services," he said. "There is also interest in the potential for crypto and blockchain in general to democratize financial services."
For most of American history, blacks have had limited access to institutions like banks and the stock market. Many see encryption as a way to circumvent this system.
This is what caught Randy Payton's attention when he decided to invest in cryptocurrencies. He is a freelance writer and marketing consultant based near Washington, DC. He says that he is involved in cryptography through token and metaverse projects.
“Blockchain allows us to be independent [from traditional banks],” he said. “We can label our projects and finance our projects, be it music or cinema. Once it takes root... you don't need to worry about the banks, the middlemen."
Bradford of the Federal Reserve Bank of Kansas City also points out that crypto marketing is part of pop culture. "You can find it in print, you can find it on social media, so that component is attractive [to black investors]."
Dan Rancy is the founder of Trapital, a newsletter and podcast covering the hip hop business. He interviewed various hip-hop artists and business moguls when cryptocurrency became popular, and says that's one of the reasons these messages resonate with the black community;
"There has been a broader perception of who many people in our society have historically viewed over the years, and that has led to the overvaluing of athletes and artists over people who are white or of other origins," he says. And then something like cryptocurrency came along, when everything was under pressure from powerful celebrities and a lot of athletes and artists, and then it fell and hit black investors and especially people who are more likely to be fans than the general population.
But celebrities aren't the only ones offering cryptocurrency. Jokes about black people, classmates or ex-colleagues suddenly making tons of money investing in cryptocurrencies, NFTs or other metaverse projects also attract black investors.
Randy Payton recently attended a blockchain-related multi-level marketing trade presentation and said that he has successfully invested in such "networks" in the past.
"Someday I'm sure," he said. "I turned $2,500 into almost $80,000 in less than a year."
Payton said he took most of his gains before last year's crash. Despite the cryptocurrency crash, headlines, and scandals, some investors like him still believe in cryptocurrencies and the technology behind them. But the success of cryptocurrencies as a compensation economy is far from certain.
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