Starting in February, the no-commission stock trading company will allow its users to buy and sell Bitcoin and Ethereum, as well 14 other crypto coins (such as Ripple, Litecoin, Bitcoin Cash, etc.).
Co-founder Vlad Tenev said it will be a break-even operation which the company doesn’t plan to profit from–instead, it will be used to grow their customer base (now at ~3m) and increase paying subscribers. Since Robinhood doesn’t charge transaction fees, it could prove new competition to Coinbase, which charges anywhere from 1.5-4% fees for trades. For smaller traders, that could eliminate the annoying delays on other platforms that can make you miss a low price you want to buy up.
When users want to buy or sell, Robinhood will give them an estimated price, connect them with trading venues/exchanges to find the lowest price, and use its economies of scale to improve the trading system over time. To counter market volatility, Robinhood puts a “collar” around your trade so if it can’t execute it at close to the estimated price, it waits for the price to return or lets you know. And in case the price of a coin skyrockets or plummets, you can place limit orders to set a price where you automatically buy or sell.
To back-up the new Robinhood Crypto feature, the company is adding new two-factor authentication options including integrations with authenticator apps to ensure people don’t get their wallets stolen and dumped.
The move is also to meet the heavy demand Robinhood has been seeing; 100k users were regularly searching for crypto trading on its app, and 95% of people surveyed said they would invest in cryptos if they came to the app.
The full list of coins you can track is Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Ripple, Ethereum Classic, Zcash, Monero, Dash, Stellar, Qtum, Bitcoin Gold, OmiseGo, NEO, Lisk, and Dogecoin.
Stripe removed Bitcoin as a payment option on its platform, and now Robinhood is adopting trading. “People are thinking about cryptos less from a payments standpoint and more from an assets investment standpoint” Tenev explains.
One problem, though, is that once traditional stock, ETF, and option trading is placed right next to cryptocurrencies, there could be even more crossovers in the respective markets.