U.S. based financial services company, Robinhood made waves in the cryptocurrency world today as it announced that it will be adding Bitcoin, Ethereum, Ripple and 15 other cryptocurrencies to its offerings in February. Since its launch in 2015, the online brokerage platform has always been a favorite among millennials who are interested in U.S. equity markets because of its streamlined, no-commission approach.
Now, Robinhood is applying that same zero-fees approach to cryptocurrency trading. This comes as a pleasant surprise for cryptocurrency traders, who have been accustomed to trading fees that range from 0.1% all the way up to a hefty 4%. This move also puts Robinhood in direct competition with fintech startup Coinbase Inc., which is currently the largest crypto exchange in the U.S.
When asked about their business model and why they chose to offer feeless crypto trading services, Robinhood co-founder Vlad Tenev admitted that they do not see Robinhood Crypto as a for-profit company, at least not for the next few years.
“We’re planning to operate this business on a break-even basis and we don’t plan to profit from it for the foreseeable future. The value of Robinhood Crypto is in growing our customer base and better serving our existing customers.”
The introduction of Robinhood Crypto should appeal to the majority of Robinhood’s clientele, which has an average age of 30. To put things into perspective, over half of every Bitcoin owner in the world is between the ages 18 and 34, according to a recent survey by Bloomberg.
Unfortunately, Robinhood Crypto will only be available to traders from California, Massachusetts, Missouri, Montana and New Hampshire in its earlier stages. Nevertheless, speculators from outside of those states can still track market data, read the news and set price alerts for a roster of 16 cryptocurrencies with their Robinhood iOS or Android mobile apps.
How it Works
To purchase cryptocurrencies on Robinhood Crypto, traders can transfer up to $1,000 almost instantaneously from their connected bank accounts. If they wish to move more funds, traders can opt for the ACH transfer, which is slower but has a higher transfer limit. As a result, this dual-transfer-mechanism makes it possible for traders to access their funds immediately after transferring them into Robinhood, ergo avoid losing out on dips in the future.
Below is an excerpt from TechCrunch that explains Robinhood Crypto in further detail:
“As a trader, when you place a buy or sell order, Robinhood gives you an estimated price, connects to a slew of trading venues, exchanges, and market centers to find the lowest price. Then it uses its economies of scale to improve and to score better prices 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.
“Just 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. The full list of coins you can track is as follows:”
- Bitcoin Cash
- Ethereum Classic
- Bitcoin Gold
- OmiseGo, NEO
Robinhood’s trading hours is between 9:30AM EST – 4:00PM EST.