A New Competitor for Cryptocurrency Exchanges
Robinhood announced today that it would be adding cryptocurrency trading to it’s fee free trading system. The move enticed over 106,000 registrations for pre-trading approval in just a few hours. Much as Robinhood has greatly disrupted the stock trading space, it is now set to disrupt the fee heavy cryptocurrency exchange markets. This move further legitimize a space that has brought in many questions since it began just a few years ago.
Robinhood’s service will begin in February of 2018. As of today, January 25, 2018, you will be able to track the performance of your favorite cryptocurrency on RH's popular trading app that can be found in the google play and apple store.
The Cryptocurrency Exchange functionality will come full with typical Robinhood perks. You can now set alerts, review news, and set limit buys and sells on your favorite Cryptocurrency coins just as you have NVDA, Google, and TTWO over the years. Essentially a top rated trading service just became available for the cryptocurrency market that is badly starving for it, especially in the United States.
Robinhood plans to operate the service at breakeven to loss, which is a supposedly admirable thing. If you’re wondering what they or any application get by offering this free service, it’s the information and data of the masses. We can sell consumer trends for any number of things currently, and if a majority of US based crypto traders migrate over to Robinhood (they should), Robinhood will have something much more valuable that the fees they could be taking. They’ll have data at scale on some of the biggest upcoming markets in the world.
Why does Robinhood add legitimacy to the Cryptocurrency space?
The CryptoCurrency investment space is nothing less than fascinating. There is an example one of my mentors uses that I think works well here. CryptoCurrency is basically Mos Eisley from Star Wars. Here's why!
If you remember the scene where Han Solo blasts the heck out of a Green Martian named Gweedo, you know exactly what I’m talking about. On Mos Eisley, there are thousands of Gweedos and just a handful of Han’s. Crypto Currency is full of coins that will likely be worthless, but there are likely a few Han’s which will legitimize the space forever. Finding them will make you very rich as it already has many in the Bitcoin space. There’s nothing better than surprise tax problems because you made too much money.
So Robinhood entering is essentially Luke Skywalker making his presence known on Mos Eisley. The company, based on stock trading valuation alone, is worth 1.3 billion dollars. It had 3 million users at time of publishing. That just went up again with the preregistrations it received for its Cryptocurrency trading today. I for one have made thousands of trades on the application without ever taking a fee. It’s neat, and it’s very much going to change the way we do Crypto.
It’s only raised 176 million in funding, a number that is low when you look at user adoption and everyday use rates of the application. Who knows what type of innovation they will bring to a brand-new technology based currency trading industry.
With the amount of stock traders the application already has, including many older demographics, there’s no telling how much the stock market and crypto market may now begin to trade together. This opens the door for more ETF’s, also known as exchange traded funds, that could greatly lift the tides of the market. This could also lead to further investment strategy from the big investment firms like Goldman Sachs and JP Morgan.
The decision to launch the product came after Robinhood saw a huge increase to search volume within their application. Many of their users were regularly checking the price of Crypto currency tickers within the app despite there being no connection to the two. NYSE tickers must be registered and the process is much different and more regulation intensive for stocks.
You also must love RH. They’ve designed the Cryptocurrency trading section of the website to exemplify 1980’s TRON based neon colors. The throwback aims to pay tribute to the 24/7 style of crypto currency. Robinhood’s typical stock display is white during the daytime and black after hours. The light and dark give an instant rhythm of open and closed. This obviously isn’t the case for Crypto and it’s neat to see the company giving a special tip of the cap to its insomniac investors.
How does Robinhood Cryptocurrency Trading Work?
We go into a lot further detail about the Robinhood application here, but Robinhood Crypto trading is not unlike Robinhood Stock Trading. You need to connect a bank account. Considering you’ve already done this, you can begin by instantly depositing $1000 via ACH. Robinhood will then post these as tradable to your account. If you have a Robinhood Gold Account, you can deposit even more than $1,000 immediately. This will give you more of a bankroll to buy cryptocurrency. The cost of Robinhood Gold is $6-200 based on balance and leverage. The rest of your deposit over $1,000 will take place more slowly. Typically, my funds take 5-7 days to hit my stock trading account if I am moving anything from $5,000-$25,000.
The crypto currency markets are volatile, making it a bit different than stock trading. Robinhood has engineered a way to make this more tolerable for its user experience. It uses an algorithm to predict a probability price and then vets your order out to a series of exchanges. It also places a collar on your placed order. If you get too far above or below the collar range, RH will use conditional logic to hold investments until the target is reached.
The twelve Coins listed at the beginning of Robinhood Crypto will be Ethereum, Litecoin, Ethereum Classic, Dash, Qtm, OmiseGo, Lisk, Bitcoin, Bitcoin Cash, Ripple, Zcash, Stellar, Bitcoin Gold, NEO, and Dogecoin. Some of our favorites! For others, we still recommend using Binance. You can find a more detailed record of Binance here.
Only Ethereum (ETH) and Bitcoin (BTC) will be available to the public when the trading feature launches, and California, Massachusetts, Missouri, Montana, and New Hampshire will be the first to see it. Other states and coins are expected to roll out after that.
Moral of the Story
Overall, this is an incredible day for the crypto currency world. We have a further breakdown of the Robinhood app and the cool features that set it apart from other apps coming soon. If you’re looking to get the app, we recommend you do so. The $1,000 limit that Robinhood places on new traders is there for a reason. Crypto currency can be a volatile sport, but if you’re up for it, think about increasing your limits. Have fun out there!