Robinhood was founded in 2015 as a commission free stock trading platform, a revolutionary idea at the time. Ever since its launch in 2015 the company has become the sweetheart of the stock market, with millions of users that have invested billions in stocks through the app. The app has been so transformational that it has brought experienced as well as novice traders to the platform.
Quite recently the Gamestop short squeeze saga brought quite a lot of bad press for the company, whose actions led to a lot of people losing money on their trades. However, even though it was surrounded by controversy it has still gained a lot of popularity. A very big reason for its astronomical popularity in the past years is because of the fact that it now allows cryptocurrencies to be traded on the app too. Since 2018 Robinhood customers can trade Bitcoin and Ethereum on the platform, along with other cryptocurrencies.
This review is mainly focused on the cryptocurrency trading platform created within the robinhood ecosystem of trading. This will help newcomers to make a better decision about their brokerage effectively.
Robinhood’s claim to fame has always been its zero fee model, it is a well known fact that Robinhood doesn’t charge any fees on its stock trades and ETFs however, it has been pointed out by many people about the fee clause in the Crypto User Agreement of Robinhood. Where the agreement says that any fees by the intermediaries will be passed to the user. That means that the fees of the Bitcoin and Ethereum network are charged as it is.
Once you sign up for Robinhood you can start trading from the get go, you would only be able to trade cryptos worth $1,000 initially. Adding more money to your account is an option only for accounts that have already completed the normal settlement. The funds would be on hold until the settlement is completed.
You can increase the limit of your account by subscribing to a Gold Account, the Gold account offers multiple tiers of limits for instant deposits. The fee for a Gold account is almost $5 for one month.
It is easy to day trade on Robinhood Crypto thanks to the fact that there are no fees. This means you can trade Crypto on the Robinhood platform with as little as $100.
Robinhood is one of the most user friendly applications for stock trading on mobile platforms. The key to Robinhood success has always been its simplicity and the ease of use it provides to its customers. Signing up on the app is very simple, however, because of KYC requirements you have to give your address as well as verification of your identity.
Currently the platform only has a few cryptocurrencies listed, Dogecoin, Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Ethereum Classic (ETC), Litecoin (LTC), and Bitcoin SV (BSV). The platform also lets you track the prices of a few more cryptocurrencies such as Ripple, Zcash and others.
The working of the application is a little different then what you would imagine, first you need to understand that crypto on Robinhood is different from stocks. You can only purchase crypto from the cash account balance you have in your account. Moreover, you cannot use any money you get from selling a stock or an ETF readily to buy crypto, it takes almost 3 days for the money to be ready to be invested in crypto.
The app also allows you to use different professional tools such as limit orders, however, the application does not allow you to hold the crypto in your personal wallet. The app is only for trading, you cannot transfer the crypto in a personal wallet or use it to buy stuff. It is not possible through Robinhood unlike other crypto exchanges.
Cryptocurrency trading has been a completely different department in the Robinhood app, it is also a completely different entity that takes care of the trades Robinhood Crypto owned and operated by Robinhood Markets LLC. Unlike its parent and sister companies Robinhood Crypto is not registered with the Financial Industry Regulatory Authority and does not come under the same legal framework. Thus from this perspective it is not one of the safest exchanges out there.
Another aspect of Robinhood’s work is that it holds the crypto in a mix of hot and cold wallets, which makes it safe from hacks and other attacks that might compromise customers' cryptocurrency. Only a certain amount is held in hot wallets to facilitate the day to day operations, otherwise most crypto is in hot wallets.
The application also has an insurance policy against crime, that protects your investment in case of theft or loss of the crypto in case of hacks. Even if you lose your crypto you are covered by the policy.
The biggest investors on Robinhood are first time novice investors, who have not been trading for long. For such investors the platform is one of the best out there. It has a complete resource of learning infrastructure that can help them study effectively and become good crypto traders so that they don’t lose a lot of money.
There’s also much information given you at every point at the start, and moving on you can always use the search function within the app that lets you find solutions to problems and see answers to already asked questions. You can also email customer service representatives of the company that are there to help you in every step along the way.
Even though the crypto world has been criticizing Robinhood a lot due to its role in the Gamestop saga. It is still one of the most popular destinations for first time crypto buyers in the US. It has also been a company shrouded in mystery related to its long term policies and the fee structure, which does not inspire any confidence in the company’s ability.
Looking at the platform from a crypto enthusiast’s point of view, it is a bit risky. Some people do not trust the mechanism in which Robinhood stores its crypto, and the lack of the option to transfer your crypto to another wallet is also one that makes me scared. Robinhood has a good reputation, however, what they did during the Gamestop saga, they cannot be trusted because of that.
If you see overall, it is still the best option for first time crypto buyers to try. For professional crypto buyers and holders it might not be the best option. However, if someone is transitioning from the stock market to the crypto market, it is the best option, as it offers the same familiarity to you. All in all good for first time buyers, not good for professional crypto traders or enthusiasts.
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