Robinhood, a commission-free stock trading app, is entering the crypto space in a bold move that could threaten Coinbase and other industry exchanges.
Starting in February, the app will allow users to buy and sell Bitcoin and dozens of other cryptos without any transaction fees. This compares to the 1.5 percent to 4 percent that Coinbase charges. Their app also one-ups Coinbase by allowing you to set up alerts on 14 top cryptocurrencies.
Bitcoin is not new to Robinhood’s management. They say they have been looking at bitcoin and cryptos for a long time, even as far back as 2010 when they were doing their own crypto mining on personal computers.
“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 growing our customer base and better serving our existing customers.”
Robinhood is a startup with $176 million in venture funding, including some VC whales such as Andreessen Horowitz, Index, and NEA.
The company is currently valued at $1.3 billion with over 3 million dedicated users.
The opportunity to cross sell their clients and millions more mainstream investors is huge. An incredible 95% of their clients said they would buy cryptos if they could so on the platform.
Robinhood allows its premier members to borrow funds to trade, though it’s not clear if that will apply to cryptos as well. The platform’s advantages over Coinbase include quick transfers to using economies of scale to secure better pricing.
You can instantly transfer up to $1,000 from your connected bank account (more if you have a gold membership), with additional funds coming over slower ACH transfer.
The 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 markets are open or closed.
Robinhood gives you an estimated price for buy or sell orders and then connects to a slew of trading venues, exchanges, and market centers to find the lowest price.
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.
Limit orders are also allowed which reduces the risk with cryptos that rise and fall quickly.
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.
“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.”