After cryptocurrency values started crashing hard this year, headlines of people losing millions, their life savings or retirement funds flooded the news. When crypto bank Celsius Network filed for bankruptcy this summer its customers alone lost US$5 billion. Even digital-asset evangelists like Binance CEO Changpeng Zhao and FTX CEO Sam Bankman-Fried saw their portfolios drop billions. But one group in particular was disproportionately affected: Black investors. 

In the last few years, several companies have used targeted marketing approaches to pitch crypto to Black communities as a tool to build individual and generational wealth. While companies like, EthereumMax and FTX spent millions on marketing campaigns using celebrities like Matt Damon, Kim Kardashian and Tom Brady to tout the potential of crypto investments and broaden its appeal, the messages to Black investors—using stars like Spike Lee and Kyle Lowry—were more intentional: Do not miss out on this wealth-building opportunity and get left behind. In Lee’s Coin Cloud ad in particular, he said that crypto is “new money” and “inclusive,” unlike “old money,” which is systematically oppressive. In other words, the sell was that investing in crypto could help level the playing field and allow Black households to make financial gains relatively quickly just like white households historically had been able to. Companies used messages that nodded to the history of financial exclusion and positioned crypto as an alternate, more accessible form of wealth creation.

Other people of colour saw the opportunity, too. About one-in-five Black, Hispanic or Asian Americans say they have invested in, traded or used a cryptocurrency compared to 13 per cent of white Americans, according to Pew Research Center. There’s also an age divide: Thirty-eight per cent of Black American investors under 40 owned cryptocurrency in 2022 compared to 29 per cent of white people in the same age group, a recent survey from Ariel Investments and Charles Schwab found. (There isn’t similar data on Canadian investors, but experts quoted in this article say we tend to follow U.S. trends.)

This means that Black investors, in particular, are likely now overweighted in their holdings with cryptocurrency, says Terri R. Bradford, a senior payments specialist at the Federal Reserve Bank of Kansas City who has researched consumer crypto ownership. So when cryptocurrency dropped, Black and other racialized groups who put money in the market became some of the hardest hit by its downfall. People lost thousands while others felt cheated by the hype. As one Black investor, Samson Williams, told NPR: “Retail investors, particularly in Black and Brown communities, they’ve been sold the sizzle, but there ain’t no steak there. And we’re the first group who loses out.”

The wealth gap and financial exclusion

The tactic of marketing crypto as a way to close the racial wealth gap has its roots in financial racism that has existed long before digital currencies. Between segregated schools that affected access to education to decades-long discrimination in the housing and job markets, Black people have traditionally had less earning power and fewer investment opportunities than their white peers. A 2019 paper by the Canadian Centre for Policy Alternatives found that as of 2015, racialized men earned 78 cents for every dollar that non-racialized men earned—a gap that has remained unchanged since 2005. Data also shows that because racialized people tend to earn less money, they have less income to invest. And, another barrier to wealth-building? Racism in home ownership. Recent reports found racial bias in home assessments as Black Canadian homeowners had the widest discrepancy in the assessed value of their properties—a traditional cornerstone of building wealth.

“The potential harm is greater for a marginalized person in a marginalized community”

All of these factors make the stakes higher for Black investors, says Sabaa Quao, co-founder of Toronto-based Wealthie Works Daily, a savings, investment and financial literacy platform built for children and their families. He says when you look at the 20th century alone, you can see the impact financial exclusion from wealth-generating opportunities, like buying property or investments, has had on racialized groups. As a result, they often have to be more financially literate and vigilant about risk management. “The potential harm is greater for a marginalized person in a marginalized community,” he says. This is because if they lose money via their investments, it’s often a proportionally larger amount of their wealth due to the historic gap.

Why crypto appealed to Black investors

It’s easy to understand why Black investors might not trust traditional investment opportunities or institutions. In 2021, 76 per cent of Black Canadian entrepreneurs surveyed by Abacus said that their race makes it harder to succeed because it’s more difficult for them to access the funding needed for their business. That same survey found that only 19 per cent trusted banks to do what is right for them and their community. Add in microaggressions experienced by Black entrepreneurs and customers, it’s not a surprise why Black investors turned to alternate sources of wealth generation like crypto.

Technology has also made it easier to invest in the stock market and buy digital assets, says Bradford, pointing out that most of us have a computer in our pocket and can sign up for a free trading account. And, she says, ease of access also includes information. “You read reviews, listen to testimonials and look at a couple of YouTube videos, then you make a decision,” she says, adding that testimonials from friends, family and respected celebrities are often seen as more trustworthy than those from banks and other financial institutions. Information is also easier to find on social media platforms like TikTok and YouTube compared to walking into a bank and hoping to talk to a financial advisor who may have unconscious biases. 

“You read reviews, listen to testimonials and look at a couple of YouTube videos, then you make a decision”

But Bradford says that not all the information on the internet is useful. She says that the positive messaging around crypto has led Black investors to overestimate the returns on digital currencies of more than 20 per cent compared to white investors, who often have better access to financial information and advisors. If a white family, for example, has long worked with a financial advisor, it’s more likely that the children of that family will have access to, or use, an advisor, too.

Plus, Quao says that investing apps are built to increase engagement. Between push notifications and using colours like red and green to motivate quick decision-making, many apps can encourage users to make ongoing or multiple investments—which can lead to impulsive behaviour and is typically not an advisable strategy for building long-term wealth. “People are up against a level of sophistication of design and marketing, rhetoric and semantics, hype and propaganda, and many people are going to be influenced by that wave,” he says. “You need to be more prudent.”

How to foster better financial inclusion 

The implications of the crypto crash signify a larger problem: the exclusion of Black investors in traditional market opportunities, the lack of trust in financial institutions by Black Canadians, a need for financial literacy around the different types of assets and their risks and the desire for wealth generation.

To help bridge gaps, ongoing education is key; it’s not enough to do one finance course in high school. Quao says the best protection against falling behind on market trends is learning early and often. He, like other Black entrepreneurs, is focused on educating and growing wealth for racialized families, through his company Wealthie Works. Other associations like the Black Wealth Club and the Black Entrepreneur Fund are focused on supporting Black Canadians and closing the wealth gap. But the best way to stay financially literate is to pay attention to what is happening in the markets. “Financial literacy degrades over time,” he says. He also stresses the importance of reading fine print and evaluating risk as crypto firms are under no obligation to give you unbiased knowledge to understand investments. “That’s really all on the individual to do,” he says.

Emma Todd, a blockchain expert and CEO of MHH Technology Group, which covers data systems, blockchain consulting and communication for emerging tech organizations, has been involved in cryptocurrencies for years, starting with mining. She says Google Finance is a good starting point, as it allows investors to customize mock portfolios, get the latest financial news and keep track of assets. There’s also financial services firm Morningstar, which offers financial literacy, research and mock portfolios, and is available to anyone.

Quao, Bradford and Todd all say that crypto investments aren’t inherently bad, and they do see a benefit to the currencies and the blockchain technology that powers the market. But, like all assets, it needs to be understood both for its value and its risks before one invests in it. And, the larger issues of financial exclusion can’t be solved with crypto alone. Government policies and institutional initiatives that help close the racial wealth gap, improve financial literacy for everyone and ensure Canadians have access to equal investment opportunities is what will help make meaningful change. As Williams said to NPR: “The day someone says, here’s how Bitcoin or crypto solved unemployment and a living wage, then I will take them seriously.”