No-commission stock trading app Robinhood will let you buy and sell Bitcoin and Ethereum without any added transaction costs starting in February, to report to Coinbase’s 1.5 to 4 percent costs in the US. And as of today Robinhood will let all users track the cost, news, and put 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 of Robinhood Crypto is in developing our customer base and more efficient servingour existing customers.”
By essentially use crypto trading as a loss leader instead of its primary business like Coinbase and other apps, Robinhood could significantly expand beyond the 3 million users it already has. Simplifying trading and tracking could bolster Bitcoin and Ethereum. And by mixing it with traditional inventory, ETF, and option trading in a single app, Robinhood could further legitimize the cryptocurrency hysterium. 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 has raised $176 million from top investors including Andreessen Horowitz, Index, and NEA that now value the company at $1.3 billion. There’s clear long-term benefit to rolling up crypto traders and using the feature as a wedge to get them to hold money with Robinhood where it earns concern, and pay for the Robinhood Gold premium tier for$ 6 to $200 a month that lets them borrow between $1,000 and $50,000.
Here’s how Robinhood Crypto works. You can instantaneously 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 defers on other platforms that they are able stimulate you miss a low price you want to buy up. The whole Crypto section of Robinhood is styled with an 80 s Tron design to denote the 24 -hour trading window, compared to its day and night themes for when traditional stock exchange are 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 marketplace centres to find the lowest price, and uses its economies of scale to improve to score better costs over hour. To counter marketplace 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 cost to return or lets you know.
And in case the price of a coin skyrockets or plummets, you can place limit orders to define a price where you automatically buy or sell. The full listing 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 exceedingly 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 days people have declared them dead and they’ve am coming stronger than ever.”
To back-up the new Robinhood Crypto feature, the company is adding new two-factor authentication alternatives 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 lately that are building the system in-house” says Tenev. Still, the move paints a giant target on Robinhood’s back. If the company get hacked, or individual users get robbed, it is unable to tarnish the fintech startup’s reputation.
Demand for the product was clear, though. 100,000 of Robinhood’s users were regularly seaching for crypto pricing and 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 rivalling crypto trading app that cribbed its epithet and elevated $10 million in an ICO.
Judging by the choices of two top startups, you could see this week as a sign of cryptocurrency’s changing intent. Yesterday Stripe removed Bitcoin as a payment option on its platform, and now Robinhood is adopting trading. “People are thinking about cryptos less from support payments standpoint and more from an assets investment standpoint” Tenev explains.
As for whether he’s personally invested in the crypto scene, Tenev admits “I’m a dabbler, definitely, but I wouldn’t say that it’s all that significant.” But it’s a good is suitable for his business, which employed a lean engineering team to drop-off stock trading costs to zero while competitors like Scottrade and E* trade can charge over$ 6 per trade to embrace their marketing and expansive retail footprint with huge overhead. Now Robinhood has managed $100 billion in transactions, saving its customers over$ 1 billion in fees.
“[ Cryptocurrency] sets power that’s historically been held by finance institutions in the hands of the people. I think that lines up immediately with Robinhood’s mission to democratize the financial system” Tenev tells me, concluding “We’re an established corporation 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 a culture phenomenon.
Revealings: The author of this article owns small positions in Bitcoin and Ethereum, and knows Robinhood’s founders from college .