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Will the Entry Of Robinhood Into the Cryptocurrency Shake Up the Liquidity and the Market?

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Whether you trade Ripple, making a profit from your Bitcoins, or simply following the financial news, there is no doubt that cryptocurrencies are shaking up the market. But things just might get a little better! Zero-commission stock trading application Robinhood will soon allow you to trade cryptocurrencies as well. Robinhood Crypto will let users buy and sell Bitcoin and Ethereum, minus transaction fees, by the end of February. For now, Robinhood Crypto lets its users track prices, the latest news and configure trading alerts on these two leading cryptocurrencies as well as more than a dozen other top crypto coins, including Ripple.

It is expected that the new product will prove to be a hit with the app’s young user base. Robinhood has stated that the average age of its customers is 30, while over half of Bitcoin traders are aged 18 to 34, placing them squarely in the company’s target bracket.


How It Works

How does Robinhood Crypto work? Well, it allows you to instantly transfer as much as $1,000 from a connected bank account (Gold members can transfer more), and lets you transact additional funds over ACH transfer, though this method is significantly slower. For smaller currency traders, this helps to alleviate the annoying delays which other platforms suffer from, letting you take advantage of low prices when you feel like buying up. The entire crypto segment of the Robinhood app has been styled in an 80s Tron design as a nod to the 24-hour trading window offered by cryptocurrency trading.

Whenever you place an order on Robinhood Crypto, the app offers you a price estimate, connects to a host of exchanges, market centers and trading venues to seek out the lowest price, and then uses the economies of scale to ensure you score better prices over time. To counteract market volatility, the app places a ‘collar’ on your trade so that if it is not possible to execute a transaction at close to the price estimate, it will wait for it to return and notify you when it does.

The Robinhood Crypto Business and Marketing Model

Trading in the digital currency market will be the first paid product, besides margin trading, that Robinhood will offer. The app made a name for itself by allowing users to buy and sell small amounts of shares without charging fees. According to the company, it will only charge for Robinhood Crypto transactions to recover trading costs, but it will not levy any commissions. Robinhood Crypto will be gradually rolled out in a few select states, with the aim of having it available in most of the U.S. by midyear.

It is set to compete with Coinbase, which is quickly establishing a name for itself in the cryptocurrency market. If Coinbase can achieve its massive success, while charging high fees, there is little that can stop the growth of Robinhood Crypto. According to many industry analysts, Robinhood Crypto could ultimately trigger a ‘fees race’ to the bottom, ultimately taking a major position among its competitors.

Why Robinhood Is Getting Onto the Cryptocurrency Bandwagon

For the past few months, Bitcoin has been the buzzword on everyone’s lips, with the cryptocurrency hitting unprecedented highs over the past year. Its value has more than doubled from October 2017, to now stand at about $11,000, although this is a drop from a high of nearly $20,000 in December.

According to Robinhood co-founder, Baiju Bhatt, the attraction of Bitcoin for companies like his is its resiliency. “So many times, people have been quick to count it out. It has gone up and gone down. Now that resiliency is something that has some real staying power,” he stated.

One of the key driving factors behind the success of Robinhood in the past has been the app’s appeal to the younger generation of investors. A large percentage of the app’s user base consists of millennials who have lived through a period of recession and, as a result, have little interest in stocks. However, Robinhood’s lack of fees and slick interface has piqued their interest.

The Final Word

By all indications, Robinhood Crypto is primed for success, especially after its entry into a market full of startups that have questionable track records. Five-year-old Robinhood is different, with its reputation managing to help it raise more than $170 million in funding from top investors. The company is no longer considered a small player, with it now valued at $1.3 billion. Robinhood Crypto will also bring in a sense of credibility to the world of cryptocurrency trading, as its stock trading arm is a member of the Securities Investor Protection Corporation (SIPC) and the Financial Industry Regulatory Authority (FINRA).

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