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Crypto is not a good investment

Worthless goldtone coins representing Bitcoin, Ethereum, and Dogecoin cryptocurrencies.

Physical Bitcoin, Ethereum, and Doge oins are worth a lot less than their virtual counterparts. Photo by Kanchanara on Unsplash.

From Vox there's How crypto failed Black investors, a look at how Black Americans have lost wealth to the crypto craze. Black Americans:

  • invested in cryptocurrency at disproportionate rates (25% versus 15% of white Americans);
  • were more likely to borrow money to buy cryptocurrency; and
  • tended to invest later at price highs and sell on the way down.

I am very much a cryptocurrency skeptic. Currency trading is volatile and high-risk, even when it's fiat currency that can be used in real world transactions. Cryptocurrency removes the rules of fiat currency, is backed by neither government nor a commodity, and isn't terribly usable as a medium of exchange. Why anyone would buy it, let alone tie up the bulk of their net worth in it, is beyond me.

And yet, that seems to be what precisely what lots of Black Americans did, especially Black Americans under 40.

The whys aren't clear, but Vox posits that distrust of a system that doesn't work well for Black Americans is a factor.

When the mainstream system doesn’t work — and it really doesn’t for many Black Americans — it’s natural to look elsewhere for something that does. That’s where the appeal of something like crypto resides. People are told it’s a way to establish financial independence and freedom and get away from the institutions that have wronged them in the past. It’s a prospect that’s easy to want to believe in.

Based on conversations I've had with my own family and friends, lots of Black Americans view the stock market as a casino rather than a tried and true way to build wealth. Through that lens, cryptocurrency probably doesn't seem any riskier. If you know someone who became crypto-rich, then buying some Bitcoin, Ethereum, or Dogecoin probably seems like a good way to change your own fortunes.

This isn't to say that you shouldn't buy cryptocurrency at all, but don't put all of your eggs in one basket. Diversification is a rule to live by when it comes to investing. For speculative investments, such as cryptocurrency, don't risk more than you can afford to lose.