Crypto investors show a racial gap. More studies are needed, by investors.

Part of getting old – or “older”, as I still prefer to say – is becoming increasingly reluctant to try anything new.

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

“Crypto”, as it is also known, is defined as a digital currency, an alternative form of payment created through something else I don’t understand, encryption algorithms.

Do not ask. Crypto fans I have the pleasure of knowing, like my son and his risk-worshipping millennial friends, tell me not to worry about how it works. I should just invest.

Right. Suddenly, I had first-hand exposure to crypto mania. I wasn’t alone.

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

I’ve steered clear of such arrangements because I’m a tightwad. I still have my old pocket money in a big jar, in the vain hope that today’s growing “cashless society” is a craze that will soon blow over.

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

I wasn’t even swayed by New York City Mayor Eric Adams, who shocked the world by asking for his first three paychecks to be converted into bitcoin and ethereum, two popular cryptocurrencies. He later appeared as a panelist at a conference in Miami where he gushed about the possibilities of the new digital version of the dollar.

I felt somewhat vindicated when the crypto scandals began to erupt, most notably 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 disappeared days later when he filed for Chapter 11 bankruptcy protection.

Adams and his fellow crypto fans were largely unfazed, arguing for their belief that what goes down must eventually come back up. Overall, cryptocurrencies have traded well below the 2021 highs, and it is not clear how much of their investment clients will make a return.

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

Pay attention.

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 the age of 40 – 38%. That’s compared to just 15% for white investors who own crypto and 29% for those under 40.

And the black investors seem to be bigger risk takers in this risky investment. They are more than twice as likely to say crypto was their first investment (11% compared to 4% for white investors).

What is most surprising about this survey, said Arielle Patrick, director of communications at Arielle Investments, are the racial differences in attitudes expressed by the investors surveyed. “Black respondents we surveyed perceive the stock market as riskier and less fair than their white counterparts do,” she said.

It could be that the novelty 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.

Hip-hop culture has also made crypto a part of the vocabulary of rap artists such as Jay-Z.

But as a recent LendingTree survey reports, black crypto investors were more likely than white crypto investors to believe their investment was no less safe than, say, an FDIC-insured bank account from which they borrowed money to make the investment.

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

Clarence Page at [email protected].