Leave behind the weekday 9 to 4 lifestyle of trading stocks for the all day, every day lifestyle of trading cryptocurrencies. Robinhood surprised everyone on Thursday by announcing that they were adding support for 24/7 and commission-free cryptocurrency trading.
How does Robinhood Crypto make money?
Robinhood makes money by collecting interest off of the uninvested money you hold in their brokerage account. But how are they going to profit from the addition of zero-commission crypto trading? Apparently, they're not.
"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” Robinhood co-founder Vlad Tenev told TechCrunch.
Robinhood is using the same strategy that it used to undercut stock brokerages - charge zero-commission fees in an attempt to appeal to day traders and millennials. It seems like Robinhood just wants to become a big player in this space for now and is willing to operate Robinhood Crypto at a loss for the foreseeable future.
Is my money insured?
No. Robinhood Crypto is legally separate from Robinhood Financial and money put towards cryptocurrencies is not insured.
"Your brokerage account is with Robinhood Financial LLC and allows trading of equities and options, while cryptocurrency trading is done through an account with Robinhood Crypto, LLC. Robinhood Crypto is not a broker dealer and is not a member of the Financial Industry Regulatory Authority (FINRA). Robinhood Crypto is also not a member of the Securities Investor Protection Corporation (SIPC), which means your cryptocurrency investments are not protected by SIPC." - Crypto Trading - Robinhood Help Center
What can I trade?
Initially, Robinhood Crypto will only support Bitcoin and Ethereum.
However, Robinhood Crypto will also offer tracking for Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Ripple, Ethereum Classic, Zcash, Monero, Dash, Stellar, Qtum, Bitcoin Gold, OmiseGo, NEO, Lisk, and Dogecoin. Hopefully this means that they will be adding support for these cryptocurrencies in the near future. Do I sense Coinbase-like pumps as these coins are added?
How do I make orders?
From the Robinhood app, you will be able to place market orders for cryptocurrencies. Because crypto is extremely volatile and the price can sharply change from when you place your order, limits will automatically be added, collared up to 1% for buys and 5% for sells.
EDIT: Limit orders will also available on the platform.
Where does Robinhood get the cryptocurrency from?
Robinhood's co-CEO Baiju Bhatt told Fortune that Robinhood will partner with a number of large institutions to acquire the cryptocurrencies on behalf of the users. The identity of those partners remains unknown.
When can I start trading?
Robinhood Crypto will start rolling out in February to select users in states where they have obtained regulatory licenses to operate in thus far, including California, Massachusetts, Missouri, Montana, and New Hampshire in February. Nearly 900,000 people are already signed up on the waitlist.
What about taxes?
Robinhood states that "Digital currency held as a capital asset will be taxed as property, and subject to capital gains and losses."
How will this affect everything else?
It will be interesting to see how Robinhood finds its place within the ecosystem of crypto exchanges. They are certainly a very attractive option for beginner cryptocurrency buyers with their zero-commission fees. So much so that some say Robinhood Crypto will overtake Coinbase. They will definitely at least introduce a whole slew of new millennial investors who will casually buy Bitcoin alongside their other stock picks, possibly leading to a Bitcoin/Ethereum pump in February. Which could also lead to an actual bubble as these same investors would probably be the first to cash out the second there's a bad day.
I also wonder what Cobinhood thinks of all this.
Sign Up for the Waitlist
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