When Hector Martinez learned about cryptocurrencies, the son of Salvadoran immigrants quickly saw its appeal: Marginalized communities could finally build wealth outside institutions that often excluded or exploited them.
Martinez, 28, who works in sales, has invested at least half of his portfolio in bitcoin and other digital currencies.
“There’s an incentive to find a new path and explore things to see if there’s a potential benefit for people like us,” he says. “From my perspective, it’s a long-term investment. I feel a belief in where this industry is going, so it’s something I want to make sure I’m a part of.”
Cryptocurrencies have become an investment craze, the stuff of memes, tweets and subreddits as celebrities, athletes and billionaires tout their favorites and pour money into the digital currencies. They are created and traded over a decentralized computer network and have a particular appeal to younger investors.
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But the digital assets are more popular with some groups of investors than others, according to data from Harris Poll given exclusively to USA TODAY. While only 11% of white Americans report owning cryptos, 23% of Black Americans and 17% of Hispanic Americans own such assets, according to two surveys of 2,010, and 2,003 U.S. adults in June and July.
Awareness of crypto is also much higher among people of color. Half of Black Americans, half of Asian Americans and 49% of Hispanic Americans say they are familiar with it, versus 37% of white Americans.
And people of color aren’t the only marginalized groups with a strong interest in decentralized currencies. One-quarter of LGTBQ Americans own crypto compared with only 13% of the general public.
Marginalized communities tend to worry they will lose money because they’ve experienced bias and unfair treatment, says Yosef Bonaparte, associate professor of finance and the director of external affairs in finance at the University of Colorado Denver.
But for groups that have experienced discrimination, currencies that are freely exchanged and not backed by a single government appear more equitable, experts say.
“There has been a long history of discrimination in investments,” says John Gerzema, CEO of the Harris Poll. “And that could be why we have seen a wide demography of interest and inclusivity in crypto – because it’s new, open and seemingly has fewer barriers to entry.”
Bitcoin, the first and most well-known which launched in 2009, was envisioned as an alternative to government money.
“Crypto is very big with Black millennials and LGBTQ Americans because it represents freedom,” says Tyrone Ross, chief executive of Onramp Invest, which provides crypto asset management technology for financial advisers. “This is very much a social movement.”
With their prices based on supply and demand, cryptocurrencies are extremely volatile, which puts their value at constant risk. But some investors from marginalized communities see crypto as a chance to finally get in on a financial boom at the front end.
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“If I put in a little money … maybe this could take me to the next level,’’ says Christian Posada, a 49-year-old attorney in Lake Worth, Florida, who primarily invests in stocks but puts $300 into crypto each month. “I could see minorities thinking: ‘Hey, I don’t see how else I’m ever going to become a millionaire. I’m willing to (take a) risk on this.’’’
Banks ‘not meant for people like me’
Among Black Americans, 43% say the banking and loans industry has treated them unfairly, and 39% of the LGBTQ community feel the same, according to the Harris Poll. That was in contrast to 28% of the general public.
Large numbers of marginalized groups also say they don’t feel welcomed by traditional financial institutions. Fifty-eight percent of Black Americans, 66% of Hispanic Americans and 59% of LGTBQ Americans say that those systems “are not meant for people like me” and that cryptocurrency allows them to invest their money outside those channels.
Among Black Americans, 34% say the ability of cryptocurrency to be owned independently of traditional banks is very important.
“Representation and equality are what crypto promotes, evokes and distributes,” Ross says.
Martinez, who lives in south San Francisco, has sobering memories of how the 2008 economic downturn affected his family.
“Loss of wages, loss of jobs, all of that was part of my family’s experience … and a lot of it stemmed from traditional financial systems,” he says, noting the bailouts of large investment banks at the time. “The government decided to support these large institutions rather than the everyday person. (It) signaled that potentially that system wasn’t created for me.”
Meanwhile, “cryptocurrency … provides accessibility to a new system,” he says, one that feels “more decentralized and could potentially benefit me, and people like me, in the long run.”
‘Working twice as hard for that one dollar of investment’
Numerous racial and societal barriers have prevented marginalized communities from flourishing financially, including a lack of capital, networks or knowledge to invest in the financial markets, experts say.
Financial redlining, the discriminatory practice of denying services like mortgages to people based on their race or ethnicity, prevented Black Americans and other people of color from buying a home in certain neighborhoods for decades.
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Additionally, people of color, who tend to make lower wages and have less inherited wealth, often were hindered from working with financial advisers or even opening brokerage accounts because they needed thousands or even hundreds of thousands of dollars to do so, experts say.
“When we look back at how wealth is built in this country, so many of those opportunities were not even available or were taken away through regulation and or redlining,” says Ramona Ortega, founder and CEO of the financial tech company My Money My Future. “But redlining more broadly is about exclusion … and that continues to happen.”
Many people of color may also have more urgent needs for their money. “We have many more obligations in our families and in our communities than other people have,” Ortega says.
Consequently, marginalized Americans have participated less in the stock market and have typically allocated a lower proportion of their money to risky assets, which has served as a longstanding barrier to building wealth, financial experts say.
Those who believe they’re experiencing discrimination are 4% to 40% less likely to participate in the stock market than white men and, conditional on investing, allocate 2% to 9% less of their wealth to stocks, according to Bonaparte.
“We’re generally more risk-averse because we have more to lose,” Ortega says. “Women of color make 50 cents to 60 cents on a dollar, so we’re working twice as hard for that one dollar of investment we’re going to put in the market.”
Hesitation to make those investments is most consistent among women, Black Americans and the LGBTQ community, Bonaparte says.
“The LGBTQ community has historically been less likely to participate in investing in the stock market because they think that they could be exposed to income and credit risks if they are fired for their sexuality,” Bonaparte says. “Social discrimination can have lasting adverse effects on the economic welfare of these individuals.”
Steve Cerqua, a 55-year-old member of the LGBTQ community, has used large brokerages to invest throughout his long career in technology and finance, but he constantly ran into challenges because of his sexuality.
“Whenever I’d try to speak to an adviser, they’d speak down to me in a condescending tone of voice even though I’ve worked in technology and dealt with finances for many years,” says Cerqua, a New York native who recently moved to Fort Lauderdale, Florida.
But once he learned more about cryptocurrency technology and began trading it four years ago, he felt it gave him a fairer chance of succeeding with investing.
“As a member of the LGBTQ community, anything that equalizes the playing field is very attractive to me,” says Cerqua, who enjoyed investing in crypto so much that he became a senior manager of software engineering at Gemini, a cryptocurrency exchange. “Investing in cryptos made me feel like I wasn’t just a little fish in a big pond. I felt like I was an equal player in the game.”
A firmer understanding
Despite their relative newness and volatility, cryptocurrencies may seem more accessible and understandable than traditional stocks for the people who invest in them.
“It almost feels like I can know it just as much someone else,” says Ortega, while with stocks “there’s this mentality (that) only the Goldman Sachs analyst knows what’s happening.’’
Though there are several cryptocurrencies, including the best-known bitcoin and ether, investors don’t have to sift through as many options as they do when evaluating company stocks, Ortega says. And crypto’s prevalence on social media also makes it seem more knowable.
“The younger generations … trust social media,” Ortega says. “They trust the transparency in communications. They can go on Reddit or on Clubhouse, all these things where they feel they get access to ‘insider info,’ and they’re able to make their own decisions.”
Crypto investor Jullian Harrison, 30, who co-owns a ball-bearings company in Richmond, Virginia, is heavily invested in stocks and says crypto makes up only about 1% of his overall portfolio. But as a Black man, he understands how some people of color might feel excluded from traditional investment vehicles.
“(Despite) knowing about stocks and going to school where that was discussed, I felt I was kind of locked out because I didn’t have $50,000 starting out to invest,” he says.
After learning about stocks from a teacher and the father of a friend, Harrison says, he has continued to gain knowledge from the successful Black businessmen who are members of his investment club.
But Harrison also sees the financial potential of crypto, and he hopes to increase his crypto holdings to 5% to 7% of his portfolio with the goal that it will not only help fund his retirement but also create a financial foundation for his young daughter.
“In my ideal world, I’m one of those crypto millionaires,’’ he says. “I’m looking at it as if you could purchase Standard Oil’s stocks and … instead of buying and selling as soon as you were a millionaire, you held it until it paid dividends. (Look at) the kind of generational wealth you could provide.’’
Help for the ‘unbanked’
Beyond the stock market, Black and Latino households have more commonly remained “unbanked,” or living without a bank account to avoid the overdraft fees that often come with them, Ross says.
More than 6% of U.S. households, or about 14 million Americans, don’t have a checking or savings account, according to the National Survey of Unbanked and Underbanked Households by the Federal Deposit Insurance Corporation.
That means many may have to rely on non-bank money orders, payday loans, rent-to-own agreements or pawn shops, Ross says.
But blockchain technology and crypto assets can mitigate some of the barriers to accessing banking services, crypto enthusiasts say. For instance, fees for cryptocurrency transactions are frequently lower than the cost of intermediary money transfers.
Buyer beware
Still, systemic problems that prevent people from connecting to banking services can’t be addressed through access to cryptocurrencies alone, according to Katten’s Financial Markets and Funds practice, which provides comprehensive legal services to asset managers.
“Many people who are unbanked indicate that they simply do not have enough money to open an account or do not believe that they have a need for a bank account,” partners at Katten said in a research note.
And cryptocurrency can be a risky investment, many say.
Despite being early adopters, 50% of Black crypto owners reportthey are “very” concerned, about crypto losing its value, compared with only 30% of white crypto owners.
LGBTQ Americans are just slightly more optimistic, with 20% saying they are “very” concerned about the value of their crypto disappearing versus 33% of the general public.
Jullian Harrison worries that the lure of big, fast returns, coupled with the ability to buy crypto in the time it takes to make a story on Snapchat, could lead some would-be investors to make reckless decisions.
“I went in, created an account, and within 10, 20 or 30 minutes I was able to buy crypto,’’ Harrison says. “That’s beautiful, but I also think it can be extremely dangerous. … It’s almost like playing a video game.”
But like Harrison, many crypto owners of color say they’re in it for the long haul: 76% of Black crypto investors are more likely to hold those assets long-term, compared with 63% of white crypto investors.
To spread out risk, Ortega says having a portfolio with diverse assets like a Roth IRA, and individual stocks, is critical. And “if you don’t have $30,000 in your retirement account,” she says, “don’t spend $30,000 on bitcoin.”
But crypto can be a part of the mix.
“I think we’re in the middle of a really big shift,” Ortega says. “People are getting empowered to take action. … I’m excited about it.”
“Young Investors: Risk and Reward” is a series that examines the aspirations and anxieties of young Americans as they invest money in the current market boom, which is lifting traditional stock prices to record highs and elevating a new, risky marketplace for virtual goods, from digital art to Dogecoin.
GRAPHICS George Petras/USA TODAY
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