Eager to trade Bitcoin for free on Robinhood? Take a number and get in line...a very long line.
More than one million people have signed up for “early access” to the brokerage app’s cryptocurrency section in the four days since it said it would offer no-cost trading in digital coins. It could be a long time before they’re able to trade.
Robinhood Financial LLC said last week it plans to let its users buy and sell digital coins without fees starting in February. It’ll roll out the option gradually with the intention of having it available to customers in most states by midyear.
That won’t be easy, as even the biggest exchanges are suffering from slow trading and other issues as demand for crypto has skyrocketed. Complaints about Coinbase Inc., one of the largest crypto exchanges instance, have surged recently.
The wave of registrations signals that consumer interest in the crypto craze isn’t slowing even after Bitcoin tumbled more than 50 percent from its mid-December record as regulators step up scrutiny. Not even one of the biggest financial heists in history dampened enthusiasm.
Robinhood became popular by offering free stock trading. There will be a charge to recoup the costs associated with the crypto transactions, though it’s not clear what that will be.
Stripe Inc., an online credit-card processor, said Tuesday that it would stop taking Bitcoin as a form of payment due to the high fees and long transaction times.
RobinhoodFinancial LLC, well-known among Millennials for its zero-commission stock trading app, announced last week plans to let its usersbuy and selldigital coinswithout fees starting this February. With the option slated to become available to customers in most states by mid-2018, over 1 millionpeople joined the sign-up list in the five days after it opened. Robinhood Crypto will offer trading ofbitcoin, the world's largestcryptocurrencybymarket capitalization, alongside the digital currency ethereum. The new feature will come in waves, first launchingCalifornia, Massachusetts, Missouri, New Hampshire and Montana. "Crypto is going to change the world and we want to help drive that," said the fintech company's co-founder, Baiju Bhatt, in an interview with Business Insider. Fintech App Says It Will Break Even on Decision Whilebullscheer on the continued breakthrough of digital currency trading into the mainstream financial space, skeptics continue to point to recent milestones as indications of abubbleready to burst. Due to the sticky supply of coins, even the mildest fluctuation in demand for digital currencies has resulted in major price swings. Bears point to the growing waitlist as another sign of people's unfounded willingness to get in on the action. Bitcoin, trading just above $10,000 per coin on Tuesday afternoon, has gained 10-fold since this time last year, yet has lost nearly 50% of its value since highs reached in mid-December. Robinhood's co-founder says the decisionto bring on crypto trading will help the platform with customer acquisition. The firm, which already lists more than 3 million users, is confident it will "break-even on this" play, which "could dramatically increase user growth."The Palo Alto, Calif.-basedstock brokerage was founded in 2013 and has raised a total of $176 million from backers including Index Ventures, New Enterprise Associates and DST Global. According to Robinhood, theunicornstartupis valued at $1.3 billion. Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia orthe writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.
No-commission stock trading app Robinhoodwill let you buy and sell Bitcoin and Ethereum without any added transaction fees starting in February, compared to Coinbase’s 1.5 to 4 percent fees in the US. Andas of today Robinhoodwill let all users track the price, news, and set up alerts on those and 14 other top crypto coins, including Litecoin and Ripple.“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” says Robinhood co-founder Vlad Tenev. “The value ofRobinhood Cryptois in growing our customer base and better serving our existing customers.”By essentially using crypto trading as a loss leader instead of its primary business like Coinbase and other apps, Robinhood could substantially expand beyond the 3 million users it already has. Simplifying trading and tracking could bolster Bitcoin and Ethereum. And by combining it with traditional stock, ETF, and option trading in a single app, Robinhood could further legitimize the cryptocurrency craze. The two trading worlds could cross-pollinate, dragging even more people into the crypto scene. Many of the startups dealing in crypto are upstarts with questionable track records. But five-year-old Robinhood hasraised $176 million from top investors including Andreessen Horowitz, Index, and NEA that now value the company at $1.3 billion. There’s clear long-term benefit to rolling up crypto traders and using the feature asa wedge to get them to hold money with Robinhood where it earns interest, and pay for the Robinhood Gold premium tier for $6 to $200 a month that lets them borrow between $1,000 and $50,000.Here’s how Robinhood Crypto works. You can instantly transfer up to $1000 from your connected bank account (more if you have a Gold membership), with additional funds coming over slower ACH transfer. 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. The whole Crypto section of Robinhood is styled with an 80s Tron design to denote the 24-hour trading window, compared to its day and night themes for when traditional stock marketsare open or closed.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, and uses its economies of scale to improve 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.And in case the price of a coin skyrockets or plummets, you can place limit orders toset a price where you automatically buy orsell. 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.Only BTC and ETH will be available for trading when that rolls out to waves of users starting in California, Massachusetts, Missouri, Montana, and New Hampshire in February, though more will be added. “We’re extremely selective about the cryptos we’re making available on the platform” says Tenev. “We’re introducing those first because these are the most mature coins that people are trading these days. Multiple times people have declared them dead and they’ve come back stronger than ever.”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. “There are several senior world-class people that we’ve hired recently that are building the system in-house” says Tenev. Still, the move paints a giant target on Robinhood’s back. If the company gets hacked, or individual users get robbed, it could tarnish the fintech startup’s reputation.Demand for the product was clear, though. 100,000 of Robinhood’s users were regularly seaching for crypto pricingand trading in its app, and 95% of those surveyed said they’d invest in cryptos if the product supported it. Robinhood even had to send a cease-and-desist to“Cobinhood”, a competing crypto trading app that cribbed its name and raised $10 million in an ICO.Judging by the choices of two top startups, you could see this week as a sign of cryptocurrency’s shifting purpose.Yesterday, 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.Robinhood Crypto features a Tron-style 80s design motifAs for whether he’s personally invested inthe crypto scene, Tenev admits “I’m a dabbler, definitely, but I wouldn’t say that it’s all that significant.” But it’s a good fit for his business, which used a lean engineering team to drop stock trading fees to zero while competitors like Scottrade and E*trade can charge over $6 per trade to cover their marketing and expansive retail footprint with huge overhead. Now Robinhood has handled$100 billion in transactions, saving its users over $1 billion in fees.“[Cryptocurrency] puts power that’s historically been held by financial institutions in the hands of the people. I think that lines up directly with Robinhood’s mission to democratize the financial system” Tenev tells me, concluding “We’re an established company and we can handle it”. The confidence to burst into the wild west of crypto could either tank his startup with a massive security fail or greatly boost its traction by alligning with what’s become acultural phenomenon.
Sources: Bloomberg, Google