Every now and then, we see Tweets that spread misinformation around, and that’s something that always happens in the crypto sphere. Cryptocurrencies are simple to understand from an end-product goal, but a bit complex to explain from a technical infrastructures viewpoint. There have been talks recently that Robinhood is restricting Cryptocurrency withdrawals for their traders. To really know if this news is true, we need to understand first what does Robinhood offer as services specifically, and then see if this withdrawal restriction is true.
Robinhood offerings as Crypto
Robinhood is a commission-free exchange that offers a wide range of financial products, such as stocks, commodities, and FX. Among those financial offerings, Robinhood jumped on the cryptocurrency bandwagon and started its cryptocurrency trading activities in February 2018, right after the famous rise and fall of the cryptocurrency market. This offering comes from a registered entity under the name Robinhood Crypto, a different company not registered in the FINRA or other regulatory bodies.
Like most known exchanges, Robinhood crypto offers CFD trading. What is CFD trading? That’s a very good question, and that’s why we’re going to jump to the next section of this article.
What is CFD trading?
Contact-for-difference or CFD for short is a form of trading that lets the trader “place a bet” whether the underlying asset will rise or fall in prices. The trader in CFD activities doesn’t own the underlying asset he’s betting on. The broker is only responsible for adjusting the trader’s P&L depending on the trader’s actual trade. It’s more of a simulation of “what would happen if you actually owned it, without owning it” type of trading.
CFD trading has its benefits:
- Low barrier to entry
- Ease of execution
- Ability to go Long or Short
- High leverage
On the other hand, CFD trading also has disadvantages:
- Risky to deal with unregulated companies
- Can be expensive for day traders
- Slippage and lags can occur
- Can be restricted during hours of high volatility
- Lack of ownership
- High cost of overnight financing
Is Robinhood restricting Crypto Withdrawals?
After explaining what a CFD broker is, and seeing that Robinhood Crypto engages in CFD activities, we can conclude that people can’t withdraw the actual cryptocurrencies from Robinhood Crypto app to their own digital apps, simply because CFD trading is just a position and doesn’t mean the trader actually owns the asset.
For this case, it is quite simple:
- You wait for a non-volatile day
- Liquidate your positions to USD(close all open crypto positions)
- Transfer the money to your bank
- Send money from your bank to another real crypto exchange
- Buy the cryptocurrency you want
- Send it back to your private wallet or keep it in the wallet of your broker