The aftermath of the cryptocurrency crash : Planet Money Two stories of consternation from inside the crypto world. Can a crypto crash spread to the wider economy? How does contagion work? And ... why has crypto had such appeal with Black investors? | Subscribe to Planet Money+ in Apple Podcasts or at

Two crypto crash Indicators

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Hi, everyone. Wailin Wong here.


And I'm Paddy Hirsch. The crypto-verse - that's cryptocurrencies and all the financial technology associated with them - has had a rough time lately. The flagship crypto asset bitcoin has fallen sharply in value. Its market capitalization is down to roughly $390 billion, about the same level it was in December of 2020.

WONG: It's quite a reverse from October of last year, when bitcoin had a market cap of $1.14 trillion and Matt Damon was pitching


MATT DAMON: Fortune favors the brave.

HIRSCH: Fortune favors the brave. I love it. Thanks, Matt.

Since that ad aired, the total value of crypto assets has dropped by two-thirds. It was at $3 trillion. Now it's 1 trillion - in fact, less than that. I really, really, really want to call Matt Damon up and ask him how brave he's feeling right now. But I don't have his number.

WONG: And he's ignoring all my texts.


WONG: I don't know why.

HIRSCH: He's such a devil.

WONG: Most investors in crypto are institutions. But a lot of individuals have made bets on crypto - some because they believe in the future of the blockchain and cryptocurrency, others because they've seen the gains many crypto firms have made, and they want to jump on that train.

HIRSCH: Yeah. A Pew Research Center survey found that 16% of U.S. adults said they had invested in, traded or used a cryptocurrency. That is a lot of exposure to one of the riskiest assets known to humankind. And the recent collapse adds up to a lot of money being lost by a lot of people.

WONG: There are two kinds of crashes - one where a bunch of people lose a bunch of money, another when a bunch of people lose a bunch of money and that sets off a chain reaction - contagion.


WONG: Hello, and welcome to PLANET MONEY. Today on the show, we have two episodes from PLANET MONEY's daily podcast, The Indicator, about the fallout from the crash. First, what would it take for a crypto crash to spread to the traditional financial system? And we look at the particular appeal of cryptocurrencies to one community - Black investors - in part because it was outside of that traditional financial system.


HIRSCH: Recently, crypto investors have been having - not to put too fine a point on it - an absolute nightmare.


UNIDENTIFIED REPORTER #1: ...Because we know it has been several consecutive days of brutal selling for bitcoin...


UNIDENTIFIED REPORTER #2: Bitcoin and other cryptocurrencies have taken a nosedive as interest rates...


UNIDENTIFIED REPORTER #3: It was another cringe day for crypto. Digital currency...

WONG: And you can divide crypto investors into two groups. You've got your institutions - that's investment funds and venture capitalists and all of that. And you've got retail investors - people like you and me.

HIRSCH: Emma Rose Bienvenu is the chief of staff at Pantera Capital. Pantera is a fund that invests exclusively in companies associated with bitcoin and crypto.

EMMA ROSE BIENVENU: I mean, obviously, you know, these - the bull markets are a lot more fun than the bear markets.

WONG: And we're definitely in a bear market when it comes to crypto. A bear market is when a market index falls by 20% or more from its most recent high. Crypto assets fell nearly 70%. So that's like a grizzly bear market. But Emma didn't seem that fazed by the fallout.

BIENVENU: This wasn't a failing of crypto or blockchain technology itself. It was the asset responding exactly as a risk on, you know, highly liquid asset would react to the market environment in which we find ourselves because of, you know, high inflation and Fed tightening. A person that doesn't have exposure to crypto, like, I would encourage them. You know, it's a great time to buy.

HIRSCH: A great time to buy, Wailin.

WONG: I think I'm going to pass. Been too scared.

HIRSCH: Not a failing. Anyway, Emma would not say whether Pantera has lost money. But she pointed out that, like most investment firms, hers is configured to weather and possibly even profit from these kinds of downturns. Now, that's not the same for individual investors, many of whom have complained in news reports and on social media platforms like Reddit that they lost thousands of dollars.

WONG: And there are a lot of individual investors in crypto. An annual Fed survey found that 12% of American adults used or held crypto purely for investment in the last year. Now, they probably didn't all lose their money, but that's 31 million people. Surely that's going to affect the economy in some way.

HIRSCH: Well, you'd think so. But Jamie Cox says probably not. He's managing partner of Harris Financial Group in Richmond, Va.

JAMIE COX: This is not going to have the same deleterious effect that we saw with the housing market, you know, rippling into banks and creating insolvencies and then leading to a potential - a global financial crisis that could have led easily into a global depression. That's not where we are.

WONG: Jamie's not making light of the losses, but he says the wider economy is pretty insulated from them. First of all, the amounts of money we're talking about are comparatively small. The market capitalization of the entire crypto market is less than $1 trillion.

HIRSCH: Yeah, a trillion dollars may sound like a lot, but it's actually less than half of the market capitalization of Apple or Amazon. So the danger of an individual fund's losses on crypto rippling through the market are pretty low, Jamie says. And as for those individual investor losses...

COX: The good news is, is there's plenty of money in the system. People have jobs. They're not at risk of hurting themselves permanently by making some bad financial choices like they would have if this had been 2008.

HIRSCH: Back then, people borrowed heavily to buy houses they couldn't afford from banks that were willing to lend them the money, no questions asked. When the market turned down, many of those people lost everything. The banks went into a tailspin, and the entire global economy nearly collapsed.

WONG: But this time around, people generally aren't borrowing huge amounts of money to invest in crypto. Perhaps more importantly, neither individuals nor corporations are using crypto assets as collateral for loans.

HIRSCH: This is a big deal - right? - because when people or companies borrow money, they have to provide collateral, some security that's some kind of asset that the lender can take and sell if the borrower defaults. Like, if you borrow money to buy a house, then the house is the collateral. And if you fail to make your mortgage payments, then the bank can take your home.

WONG: Companies use all kinds of stuff as collateral for the loans they borrow. But for the most part, no one right now is using crypto assets. They're too risky, too volatile, too uncertain. And that means that the corporate loan economy - all $22 trillion of it - is not affected by what's going on in crypto-land.

HIRSCH: And lenders' refusal to accept crypto assets as collateral for loans is like this huge firewall between the crypto-verse and the wider U.S. economy. Now, that's not to say that crypto doesn't leak through here and there. Jamie says the stock market's a bit of a weak link because publicly traded corporations are increasingly beginning to dabble in crypto.

COX: There's lots of ownership in cryptocurrency that didn't exist a couple of years ago. The more notable ones are Tesla or MicroStrategy, but there are plenty of others - insurance companies and the like - who have taken positions, albeit small relative to their balance sheet, but trying to learn how these things work. So it's a contributing factor to some of the declines in the Nasdaq.

WONG: In other words, while the U.S. economy is pretty insulated from the ups and downs of the crypto-verse for now, things are moving fast. Crypto assets are becoming increasingly mainstream.

HIRSCH: And that means more and more Americans are going to become exposed to that world, either directly through their own investments or indirectly by owning stock in companies that have put money into crypto. And Jamie says that's something that the government is very aware of.

COX: I think that regulation was already being teed up, but it is definitely going to come in in a major way. You're going to see the SEC regulate to make investment advisors and things like that have higher fiduciary standards. And then you're going to have Congress come in and basically have a framework where it's going to be really, really difficult to have these things, you know, negotiable and operable in the United States.

HIRSCH: Regulation - that might sound like a bummer for freedom-loving crypto-heads. But Emma Rose Bienvenu at Pantera Capital - remember, Pantera invests exclusively in the crypto-verse - she agrees that some regulation is needed, if only to protect individual investors.

BIENVENU: There's kind of a trope that, you know, people who are working in crypto investment firms are anti-regulation and just kind of, you know, libertarian. That's actually not the case at all for us. We think sensible regulation would be very good. And a lot of very dishonest projects, you know, led to a lot of sort of people that just didn't really know how these products worked losing their life savings. And that is unacceptable.

WONG: A lot of people believe that the blockchain and cryptocurrency are the future of finance. Even governments are getting on board the crypto train. But that doesn't mean that, going forward, the crypto market is going to be any less volatile or risky than it is today.

HIRSCH: Yeah. It could actually mean greater risk to the economy as these companies get bigger and more people invest in them. So yes, we can afford to wave off if not ignore this latest crypto meltdown, but we probably won't have that luxury for very much longer.


WONG: While the economy is weathering this current crash, some groups of people haven't been as lucky. After the break, Adrian Ma reports on why crypto has become so popular with Black investors and what the crash could mean for the racial wealth gap.



Back in 2014, Samson Williams got some advice from a co-worker that would change the trajectory of his life.

SAMSON WILLIAMS: He was like, Samson, here's three things to improve your life - get on LinkedIn, wear better socks, and buy some bitcoin. So I got on LinkedIn, bought myself some Hello Kitty socks and bought some bitcoin in 2014.

MA: And it was that last thing - buying $200 worth of bitcoin - that sent Samson down a rabbit hole. A few years later, by 2017, he saw hundreds of other new cryptocurrencies being created. He saw the world's first bitcoin billionaire get minted, and it felt like it was becoming a mainstream thing. Samson became a true believer in the coming cryptocurrency revolution. Samson is Black, by the way, and he says one thing he was particularly excited about was this growing idea in some parts of the crypto community that crypto could be a driver for racial equity.

WILLIAMS: We're going to change the world here.

MA: That was a few years ago, and since then, Samson's view of crypto has changed a lot. And that was even before the massive crypto crash this year.

WILLIAMS: Retail investors, particularly in Black and brown communities - they've been sold the sizzle, but there ain't no stake there. And we're the first group who loses out.

MA: In a recent survey by Ariel Investments and Charles Schwab, 25% of Black investors reported owning crypto, and that's compared to just 15% of white investors. And other surveys tell a similar story. So to figure out what's driving this adoption and what the crash in crypto means for building Black wealth, we talked to Terri Bradford. Terri studies payment systems at the Federal Reserve Bank of Kansas City, and she says she was a little surprised to see Black consumers embracing crypto way more than white consumers.

TERRI BRADFORD: It didn't intuitively make sense to me that that was actually happening. And I was like, no way, that can't - you know, that can't be true.

MA: She says part of the reason she was surprised is that Black consumers are a lot less likely than their white counterparts to invest in the stock market or retirement funds. For a lot of reasons, which all lead back to systemic racism, African Americans in general have less wealth to invest.

BRADFORD: Whether it's income, homeownership, home equity, investments, Black consumers are almost always at the very bottom of all of those measurements.

MA: Terri wondered why an outsized proportion of Black consumers seemed to be drawn to this relatively new, relatively risky digital asset. In her research, a few themes emerged. For one thing, she says, a lot of Black consumers are distrustful of traditional financial institutions. And you don't have to look too hard into history to find examples of why. She said take, for example, the Freedman's Savings Bank. Congress chartered the Freedman's Bank in 1865 after the Civil War. Tens of thousands of formerly enslaved people deposited their money there, but those in charge of the bank were white.

BRADFORD: The folks that were responsible for running the bank got into some pretty risky, perhaps shady transactions and, in the end, basically lost all of that money.

MA: The bank collapsed. Many depositors lost all their savings. And Terri says this is just one early example of how financial institutions have failed or mistreated or discriminated against Black consumers. In the middle of the 20th century, you had decades of lending discrimination, aka redlining. Then in the early 2000s, you had predatory lending in Black neighborhoods, which helped lead to the Great Recession, which wiped out a huge chunk of the country's Black wealth. And to top it all off, add the microaggressions, or in some cases the uber-aggressions, a lot of Black customers have faced while banking.

BRADFORD: That type of thing lingers, but it does generationally have an impact. And this distrust is there. Some folks feel the financial system just is not working.

MA: A recent estimate of the per capita wealth of white and Black Americans pegs the wealth gap at 6 to 1, and those researchers say the gap is getting wider. Terri says crypto might seem to some folks like an opportunity to catch up - an alternative path to financial freedom without banks or government control, where the barriers to entry are low. And crypto marketing has helped carry this message.


SPIKE LEE: The digital rebellion is here. Old money is out. New money is in.

MA: Celebrities like Spike Lee, Megan Thee Stallion, LeBron James and a whole lot of others have appeared in ads championing the virtues of crypto.

BRADFORD: It's been hyped pretty well by athletes, entertainers - you know, so folks that look like us - right? - that do things that we do, that talk the language that we talk, that share some of our common struggle.

MA: And while Terri is not completely anti-crypto, this hype does worry her.

BRADFORD: The folks that can stand to lose the least are the ones that are going to get hurt the most. And there are no guardrails around this right now.

MA: The value of cryptocurrencies worldwide has plunged about 56% in the past three months. That's according to Even so, some people believe that cryptocurrency can still be a building block for Black wealth. Tonya Evans is one of them.

TONYA EVANS: Here comes this new asset class, and it doesn't require permission to participate.

MA: Tonya is a professor at Penn State Law, and she teaches classes on cryptocurrency and blockchain technology.

EVANS: So many people talk about the risk of getting into crypto. I am one of the people who talk about the risk of not being in it. Even as a Black, queer woman in this space, what opportunities can we have if we lean into the language of the future of money? And that's what I think this space presents the opportunity for us to do as Black Americans who are going to move the needle and hopefully stay ahead of the curve.

MA: Now, in recent months, lots of people have lost money. She doesn't want to diminish that. But Tonya still believes it is relatively early days and that cryptocurrencies and the technology behind them, blockchain - they're not going away. In the meantime, Tonya says she wants to see more consumer education around cryptocurrency and more consumer protections. And on that point, Samson Williams agrees. You remember Samson from the top - early bitcoin adopter, Hello Kitty socks. But he's coming from a very different angle.

WILLIAMS: You're seeing that people are spending their hard-earned money, their paychecks, their rent on these digital, quote-unquote, "assets" that have no underlying value.

MA: Today, Samson describes crypto as a Ponzi scheme.

WILLIAMS: If you want to sustain your faith-based currency, the best way to do that is prey on the uninformed.

MA: Samson says he sold off most of his crypto holdings a couple of years ago, but he still has a foot in the space. He has a consulting business where he focuses on blockchain. And so while he still sees some promising uses for the technology, he's no longer betting on crypto as an investment or as something that's going to help solve the racial wealth gap.

WILLIAMS: The day someone says, here's how bitcoin or crypto solved unemployment and a living wage, then I will take them seriously. So if you don't have a job, you don't have the disposable income to invest. And so bitcoin doesn't address human rights, civil rights, voting rights. Before I got out of the church of bitcoin, I did pretty well. But I'm still a Black guy in America. Is bitcoin going to help other Black and brown folks out of the vestiges of unchecked capitalism? No. Why? 'Cause that's a political decision.

MA: In other words, Samson does not think that crypto is going to help spread the wealth. And there's actually early economic research to suggest the wealth already in crypto is pretty concentrated. According to this one study that looked at Bitcoin, they have the .01%. The researchers estimated just 1/100 of a percent of bitcoin investors held more than a quarter of all the bitcoin in circulation.


WONG: That was Adrian Ma. These episodes of THE INDICATOR were produced by Jamila Huxtable and Nicky Ouellet. They were engineered by Isaac Rodrigues and Gilly Moon and fact-checked by Catherine Yang (ph). Viet Le is THE INDICATOR's senior producer, and Kate Concannon edits the show. I'm Wailin Wong. This is NPR. Thanks for listening.

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