What Is Robinhood Crypto Exchange?
Robinhood Crypto exchange is a new digital coin platform where one can invest and trade in cryptocurrencies using a mobile app. When it launched in 2013, Robinhood only catered to conventional securities, like ETFs or stocks. But recently (February 2018), the company added Robinhood crypto stocks, thereby adding cryptocurrency trading to its portfolio.
Investors can access the crypto exchange at crypto.robinhood.com. The “Robinhood” app is currently available on both “Android” and “iOS.” As it is relatively new, search engines are buzzing with questions.
In this Robinhood review, we’ll answer common questions like:
- What is Robinhood Crypto exchange?
- Is Robinhood actually free?
- How does Robinhood exchange work?
- What is the minimum amount of cryptocurrency I can purchase on Robinhood Crypto exchange?
- How does Robinhood Crypto exchange store coins?
- How is Robinhood Crypto exchange different from other crypto exchanges?
The last of these questions can best be answered by looking at the benefits of Robinhood Crypto exchange.
Benefits of Robinhood Crypto Exchange
The biggest benefit of Robinhood Crypto exchange is that it offers zero-fee trading of cryptocurrencies. The other benefit is that it is based in the U.S. What else?
One does not need to be very rich to invest because Robinhood allows investors to buy or sell cryptocurrencies for as little as $0.01. However, if you want to buy or sell bitcoin fractions, the minimum is $0.10. Another big advantage for U.S. investors especially is that Robinhood will soon be supported by many states.
How Does Robinhood Crypto Work?
Robinhood’s cryptocurrency trading features are accessible from the standard Robinhood interface. Cryptocurrencies, stocks, ETFs, and options are available side by side, in one app. As the app is available for mobile devices, you’ll be able to invest in whatever asset you desire, from anywhere.
All the crypto news will also be at your fingertips as Robinhood added crypto news and price alerts of 14 cryptocurrencies (as of now).
Placing a Robinhood cryptocurrency order is pretty straightforward. When the crypto feature launches, users will be able to transfer up to $1,000 from their connected bank account instantly. Additional funds can be transferred later.
Once you have money in your account, you can start trading. Robinhood can give you an estimated price, which is highly competitive. The platform can achieve this low price by sifting through many trading venues, exchanges, and market centers to find the lowest price, using its economies of scale to score better prices. (Source: “Robinhood Crypto: Bitcoin Cryptocurrency Trading Exchange?,” BitcoinExchangeGuide, last accessed February 20, 2018.)
How Is Robinhood Crypto Exchange Different from Other Crypto Exchanges?
The $1,000 instant access is a big differentiator from other exchanges. It means users can avoid the long transfer times and annoying delays experienced on other exchanges. The monetary benefit of this is huge, as users avoid missing out on price drops and other purchase opportunities.
Another differentiator is that Robinhood puts a “collar” on your trade to reduce market volatility. In other words, if Robinhood is unable to execute your trade at close to the estimated price, it will wait for the price to return to that level or return your money.
And while some exchanges do not support “limit orders,” Robinhood does. This means you can set a price and Robinhood will automatically buy or sell when the coin reaches that price. (Source: Ibid.)
Which Cryptocurrencies Does Robinhood Crypto Exchange Offer?
To start, Robinhood Crypto supports buying, selling, and real-time market data for Bitcoin (BTC) and Ethereum (ETH). But that might not be an accurate answer to the question.
You see, Robinhood also supports real-time market data for Bitcoin Cash (BCH), Bitcoin Gold (BTG), Dash (DASH), Dogecoin (DOGE), Ethereum Classic (ETC), Lisk (LSK), Litecoin (LTC), Monero (XMR), NEO (NEO), OmiseGO (OMG), Qtum (QTUM), Ripple (XRP), Stellar (XLM), and Zcash (ZEC). In the near future, it could support trading for some of these altcoins. (Source: “Crypto Availability,” Robinhood, last accessed February 20, 2018.)
The more important question would be: “Which states will have access to Robinhood Crypto exchanges?”
States Supported by Robinhood Crypto Exchange
Robinhood Crypto plans to have a staggered rollout across the states. In the first couple of months, the will exchange support only select pilot states: California, Massachusetts, Missouri, Montana, and New Hampshire. As popularity and demand increase, other American states will be added to the list.
Minimum Amount of Cryptocurrency You Can Purchase on Robinhood Crypto Exchange
The fact that one can trade for less than a dollar is a huge pull for Robinhood. Users can purchase a minimum of 0.00001 BTC and 0.001 ETH here.
How Does Robinhood Crypto Exchange Store Coins?
Robinhood stores the coins purchased on its crypto platform in a strategic mix of online and offline wallets to ensure maximum security, without losing out on accessibility.
Is Robinhood Crypto Actually Free?
Yes! Robinhood really believed that a technology-driven brokerage can easily cut out the overheads that make other brokerages costly. And when they started in 2013, they put their belief into practice. The company’s real selling point is that it allows investors to make stock or ETF trades without paying commissions. And now it’s using this same selling point for crypto trading. While this is great, it makes one wonder how Robinhood exchange makes money.
How Does Robinhood Exchange Makes Money
The exchange is not a not-for-profit organization. It makes its money in three different ways.
First, it collects interest on the cash and securities in Robinhood accounts. Though the company does not disclose what its interest rates are, a report by Barron’s suggests that the interest is 3.5% or thereabouts. (Source: “Commission-Free Trades,” Barron’s, December 19, 2014.)
Second, the exchange earns revenue from rebates it gets by directing its order flow to broker-dealers.
And third, it makes money from its premium service, “Robinhood Gold.” Although Gold also offers commission-free trading, users pay a monthly fee to get additional benefits like extended trading hours, a line of credit to invest, instant deposits (no three-day wait period), and instant reinvesting. The monthly fee can be anywhere between $6.00 and $200.00, depending on the size of the account.
The Gold membership has been quite popular and the exchange has seen an average increase of 17% in signups every month since its launch in September 2017.
The company has also raised $176.0 million in total funding, from venture capitalists like Index Ventures, Howard Lindzon, Andreessen Horowitz, Tim Draper, and Google Ventures. (Source: “How does Robinhood make money?,” Vator, Inc., April 27, 2017.)
Is Robinhood Safe to Use?
To answer this question, it’s important to know the differences between Robinhood Financial LLC and Robinhood Crypto, LLC. Both are subsidiaries of Robinhood Markets, Inc.
Robinhood Financial is registered with the U.S. Securities and Exchange Commission (SEC). In addition, it is a member of the Financial Industry Regulatory Authority (FINRA), which does testing and licensure of agents and brokers and has a transparent disclosure framework that protects investors.
Investments with Robinhood Financial are also covered by the Securities Investor Protection Corporation (SIPC), which protects money invested in a brokerage that files for bankruptcy. It’s like an insurance for funds invested.
Given all these measures, it’s evident that the platform has gone to great lengths to ensure its funds’ safety. So yes, Robinhood Financial is safe to use.
But as mentioned before, Robinhood Crypto is not the same as Robinhood Financial. Robinhood Crypto is not a member of FINRA or SIPC.
But from a cryptocurrency perspective, the exchange uses state-of-the-art security measures that are process-driven and technologically advanced. For added security on coin transfers, the exchange insists on authorization from a select (and constantly changing) group of people. This list of people is not disclosed internally or externally. To keep abreast of the changing security scenario, Robinhood also hires third-party security experts to test and update its systems regularly.
If you want to stay aware of the latest buzz in the cryptocurrency ecosystem, you might want to take a look at Robinhood and its band of merry investors.