Crypto skeptics predicted that the downfall of crypto markets was inevitable and the current state might be proving them right. Cryptocurrency prices continue to crash and Bitcoin dropped this week to its lowest level since December 2020, falling below $21,000 to $20,950.82.
Crypto has been attractive to Black investors, at least up until now. About 11 percent of Black investors named crypto as an entry point to investing, compared to 4 percent of white Americans surveyed by Ariel Investments and Charles Schwab Corp. Some 23 percent of Black investors under age 40 say they began investing through crypto. A quarter of Black Americans surveyed currently own crypto.
Here are seven things for Black America to know about the crash of crypto markets.
Economist and Bitcoin skeptic Peter Schiff predicts that the most popular digital currency will drop at least as low as $20,000. That would be a significant fall from its Nov. 10, 2021, all-time high of $69,044.77.
Bitcoin represents more than 45 percent of the crypto market, according to data firm CoinGecko, and has lost more than 65 percent of its value.
With Bitcoin in the midst of its worst slide in years, long-term holders are being tested and could be weighing their options.
“Bear-market blues have set in among even the most ardent crypto proponents,” James Malcolm, head of foreign exchange and crypto research at UBS, told Bloomberg. “Capitulation can come in many forms. Equally, relief too as we are now in full-blown panic mode, and the bar for a hawkish Fed this week is pretty high.”
Markets are considered to be in bear territory when stocks, on average, fall at least 20 percent off their high.
Other cryptocurrencies are also on a downward spiral. According to the MVIS CryptoCompare Digital Assets 100 Index, which measures 100 of the top tokens, the entire crypto market dropped as much as 17 percent, also its lowest point since December 2020, Bloomberg reported.
Crypto billionaires are seeing their fortunes dwindle. Zhao Changpeng, the founder of Binance, the world’s largest cryptocurrency exchange, and once the world’s 11th richest man, lost 89 percent of his wealth. The 44-year-old’s fortune dropped to $10.2 billion.
Sam Bankman-Fried, the 30-year-old CEO of crypto trading platform FTX, saw his fortune drop by 66 percent after it peaked at $26 billion, Bloomberg reported.
Coinbase co-founders Brian Armstrong, 39, and Fred Ehrsam, 34, once worth a combined $18.1 billion, have seen their fortunes decrease to $2.1 billion.
For Black investors who’ve traditionally faced discrimination in other financial arenas, cryptocurrency has been seen as a path to economic equity and wealth building.
The crash would seem bad for Black investors, but some experts caution against discounting the savvy of Black crypto investors.
“For whatever reason, folks want to paint it as if Black Americans and folks invested in crypto aren’t savvy, and they are savvy,” said Tyrone Ross, a financial advisor specializing in cryptocurrency investing, in a USA Today report.
Ross, who is Black, is the founder of 401STC, a financial consulting business. He added, “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.”
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
Black investors have been leaning into crypto, but there has been a push to get them in the stock market, which traditionally they have avoided in general. Will the crypto crash scare Black Americans away from investing altogether?
“A lot of people I know in my community who were investing in crypto … that’s the first $1,000 they ever invested,” said Jullian Harrison, 30, a Richmond, Virginia-based business owner, in USA Today. He is worried that the crypto’s recent drop will deter less-experienced Black investors not just from crypto investing, but from investing in the stock market or even real estate.
“When you go from $500 to $5 and you don’t have that to lose, that does something mentally that may last generations,” Harrison said.
If every con needs a rube, is crypto one of them? Since the early days of America, people have tried to strike it rich fast. And for some, cyrpto seemed like a get-rich-quick scheme.
CNBC’s Jim Cramer, host of the financial shows “Mad Money” and “Squawk on the Street,” said he thinks crypto and Bitcoin could all be a scam.
After a private conversation with tech executives recently, Cramer said he got the sense that Silicon Valley thinks “crypto is a con and its promoters have taken an awful lot of money from unsuspecting investors.”
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