Opinion: Cryptocurrency collapse will hit minorities and youth harder

For many people, digital assets conjure up images of so-called “crypto bros”—the stereotype of young, well-educated men of European descent with good income prospects. In fact, Americans of African and Hispanic descent are disproportionately represented among US investors.

Youth is certainly a differentiating factor. But the ability to comfortably bear losses may not be. Experts should perhaps guard their contempt for digital asset promoters who only use jargon rather than pay-out-of-pocket buyers.

Since last November, the total cryptocurrency market cap has dropped by two-thirds — or more than $2 trillion — to less than $1 trillion. Bitcoin lost 70% of its value, trading at just over $20,000.

The doom of digital assets will hit minority investors. A Pew Research Center report last year showed that Asian, black and Hispanic adults are more likely than whites to buy tokens.

A quarter of black Americans with a household income of more than $50,000 own cryptocurrency, according to a survey by Ariel Investments and Charles Schwab, compared with just 15% of white Americans with similar incomes. More than twice as many black investors said cryptocurrency was their first investment – ​​11% versus 4%.

Caution with traditional investment products has historical roots. In the past, people of color were subjected to discriminatory lending practices by big banks. They are most often targeted by predatory lenders with risky loans.

Across all ethnicities, 25-34 year olds are the predominant age group, according to Insider Intelligence. Young people and minorities can figure as significant buyers of cryptocurrencies because income and personal wealth are lower in these groups. Real estate is out of reach as an investment in expensive cities like New York and San Francisco for people of modest means. For some of them, cryptocurrencies may have seemed like affordable alternatives.

The real “crypto bros” – programmers at digital startups – face a double whammy. They can become redundant as the value of the tokens they saved from wages paid partially in cryptocurrencies evaporates.

The cryptobubble was mainly driven by money in abundance. But a less prominent driver may have been a faster rise in the price of assets like housing or college education than in wages. According to Brad Sherman, a congressman from California, “We need a society where people make enough money [para] save and buy a house instead of a coin”.