Key Takeaways
- • Index funds significantly outperformed cryptocurrencies in 2022: Standard market index funds increased in value by 12.3–13.9 percent, while the median cryptocurrency declined by 12.8 percent, according to research by the Center for Economic and Policy Research (CEPR).
- • Black Americans hold cryptocurrencies at disproportionately higher rates than traditional equity investments: Survey data shows Black consumers are more likely to own cryptocurrencies than stocks and mutual funds, reversing the pattern seen among white investors who favor traditional equities—25 percent of Black Americans owned crypto as of 2022 compared to 15 percent of white investors.
- • Crypto marketing targets Black wealth-building aspirations but carries elevated risk: Heavy marketing by Black celebrities and social media campaigns promote cryptocurrencies as vehicles for building "generational wealth," yet Black investors—often novice investors—are more likely to be misinformed about cryptocurrency risks and regulatory protections.
- • Over 25,000 cryptocurrencies exist with minimal real-world utility: The vast majority of cryptocurrencies cannot function as practical payment instruments for everyday purchases, undermining original currency use cases and positioning them primarily as speculative investments.
- • Regulatory warnings and stronger protections are needed for vulnerable populations: CEPR Director Algernon Austin called for enhanced regulation and clearer risk warnings targeting low-income and minority investors, citing widespread misperceptions about cryptocurrency safety and regulatory oversight.
Summary
Research published by the Center for Economic and Policy Research on January 10, 2023, presents a direct performance comparison between traditional stock market index funds and cryptocurrencies, finding that index funds substantially outperformed crypto assets in 2022. Index funds gained 12.3–13.9 percent in value during the year, while the median cryptocurrency declined 12.8 percent. This analysis examined 83 cryptocurrencies and represents a broader trend in which both asset classes declined from 2021 to 2022, but with notably divergent outcomes.
The research underscores a critical disparity in investment behavior among demographic groups. Black Americans exhibit significantly higher cryptocurrency ownership rates relative to traditional equity investments, contrasting sharply with white investors. According to the 2022 Ariel-Schwab Black Investor Survey, 25 percent of Black Americans owned cryptocurrency compared to 15 percent of white investors. Conversely, 58 percent of Black Americans own stocks versus 63 percent of white Americans. A 2021 Pew Research Center survey found that 18 percent of Black adults had invested in or traded cryptocurrencies versus 13 percent of white adults, highlighting a consistent pattern of elevated crypto adoption within Black communities.
Market participants have aggressively marketed cryptocurrencies to Black consumers as tools for building generational wealth—assets sufficient to pass on to children. This messaging has been amplified through Black celebrity endorsements and targeted social media campaigns. However, survey evidence suggests many investors, particularly Black investors who tend to be novice participants, harbor significant misconceptions about cryptocurrency safety and regulatory protections. The cryptographic asset market contains over 25,000 cryptocurrencies, yet virtually none function as practical payment instruments for everyday transactions, undermining the original vision of cryptocurrency as alternative currency.
Algernon Austin, Ph.D., Director of Race and Economic Justice at CEPR, testified before the SEC's Investor Advisory Committee in June 2023, advocating for stronger regulation and clearer risk warnings specifically targeting low-income and minority investors. Austin emphasized that enhanced consumer protections are necessary given the concentration of crypto investment among populations with less experience in traditional markets and greater exposure to marketing claims about wealth-building potential. His recommendation reflects growing concern that retail investors, particularly in underrepresented communities, face disproportionate downside risk from speculative cryptocurrency investments compared to diversified index fund strategies with documented historical returns.
The research underscores a critical disparity in investment behavior among demographic groups. Black Americans exhibit significantly higher cryptocurrency ownership rates relative to traditional equity investments, contrasting sharply with white investors. According to the 2022 Ariel-Schwab Black Investor Survey, 25 percent of Black Americans owned cryptocurrency compared to 15 percent of white investors. Conversely, 58 percent of Black Americans own stocks versus 63 percent of white Americans. A 2021 Pew Research Center survey found that 18 percent of Black adults had invested in or traded cryptocurrencies versus 13 percent of white adults, highlighting a consistent pattern of elevated crypto adoption within Black communities.
Market participants have aggressively marketed cryptocurrencies to Black consumers as tools for building generational wealth—assets sufficient to pass on to children. This messaging has been amplified through Black celebrity endorsements and targeted social media campaigns. However, survey evidence suggests many investors, particularly Black investors who tend to be novice participants, harbor significant misconceptions about cryptocurrency safety and regulatory protections. The cryptographic asset market contains over 25,000 cryptocurrencies, yet virtually none function as practical payment instruments for everyday transactions, undermining the original vision of cryptocurrency as alternative currency.
Algernon Austin, Ph.D., Director of Race and Economic Justice at CEPR, testified before the SEC's Investor Advisory Committee in June 2023, advocating for stronger regulation and clearer risk warnings specifically targeting low-income and minority investors. Austin emphasized that enhanced consumer protections are necessary given the concentration of crypto investment among populations with less experience in traditional markets and greater exposure to marketing claims about wealth-building potential. His recommendation reflects growing concern that retail investors, particularly in underrepresented communities, face disproportionate downside risk from speculative cryptocurrency investments compared to diversified index fund strategies with documented historical returns.
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