Investors in cryptocurrency show a racial gap

Part of growing old — or “older,” as I still prefer to say — is to become increasingly reluctant to try anything new.

This has led me, among other benefits, to avoid cryptocurrency.

“Crypto,” as it also is known, is defined as a digital currency, an alternative form of payment that is created through something else I thoroughly do not understand, encryption algorithms.

Don’t ask. Crypto fans whom I have the pleasure of knowing, like my son and his risk-adoring millennial friends, tell me I shouldn’t worry about how it works. I should just invest.

Right. Suddenly I was getting firsthand exposure to the crypto craze. I was not alone.

All of which began to sound to me like a Ponzi scheme, a form of fraud in which belief in the success of a bogus enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.

I have steered myself away from such schemes because I’m a tightwad. I still keep my old pocket change in a big jar, in the vain hope that today’s growing “cashless society” is a craze that will blow over soon.

So, while LeBron James, Spike Lee and other crypto ad stars got richer, I sat back on my wallet and tried not to think about the potential crypto-wealth I was leaving for other people to invest.

I was not even swayed by New York Mayor Eric Adams, who startled the world by asking that his first three paychecks be converted into bitcoin and ethereum, two popular cryptocurrencies.

I felt somewhat vindicated when the crypto scandals began to erupt, most famously in the form of Sam Bankman-Fried, founder of FTX, a cryptocurrency trading platform and its hedge fund arm, Alameda Research. His reported net worth of $16 billion in early November was gone a few days later when he filed for Chapter 11 bankruptcy protection.

Adams and his fellow crypto fans were largely unmoved, arguing for his faith that what goes down must eventually come back up. Overall cryptocurrencies have been trading well below their 2021 highs and it’s not clear how much of their investment customers will recoup.

No, all is not totally lost. Crypto, like other currencies, often goes through boom and bust cycles.

But what really caught my eye was the latest Ariel-Schwab Black Investor survey, a leading annual report on investment patterns by race, conducted for the past 24 years by Chicago-based Ariel Investments and Charles Schwab.

Black investors, the survey reports, have a higher investment rate (25%) in crypto than white investors. The figure is even higher for Black investors under age 40 — 38%. That’s compared with only 15% for white investors who own crypto and 29% for those under 40.

And the Black investors appear to be bigger risk-takers in this risky investment. They’re more than twice as likely to say crypto was their first investment (11% compared with 4% for white investors). What’s most surprising in this survey, said Arielle Patrick, chief communications officer at Arielle Investments, are the racial disparities in attitudes expressed by the surveyed investors. “Black respondents we surveyed perceive the stock market as more risky and less fair than their white counterparts do,” she said. It may be that the newness of crypto and its shorter track record is a big attraction for the Black respondents to the survey, she said. And younger investors may be more responsive to crypto marketing campaigns, which have included Super Bowl ads featuring James and Lee.

A recent LendingTree survey reports Black crypto investors were likelier than white crypto investors to believe their investment was no less safe than bank accounts insured by the FDIC from which they had borrowed money to make their investment.

Before you flock to crypto, as with any other investment, do your homework.