Many consider Robinhood to be the investment platform of choice for millennials and Gen Z. The company has removed barriers to entry for many young people by eliminating much of the complexity and baggage associated with more traditional routes to trading and investing.
Since 2015, new traders have been able to load a simple mobile app and execute trades at the click of a button. The Robinhood interface provides an intuitive overview of charts and market developments so that users can keep up to date on their portfolios.
Robinhood also offers commission-free trades. This is another reason it has become wildly popular with younger generations. Many more established investors have accused the app of encouraging poor investing decisions, precisely due to its simplicity, particularly when it comes to users trading on margin. Furthermore, many partially blame Robinhood for the GameStop short squeeze and high-profile retail trading antics of 2021.
After Gamestop, many of those involved turned their sights toward crypto. Lured by the crypto bull run, thousands of traders were drawn in by the cryptocurrency options supported on Robinhood. The app’s users can purchase from a list of seven cryptocurrencies — a small number, which pales in comparison to crypto-specific trading platforms like Binance or Coinbase. Cryptos currently available to trade are listed here and include Bitcoin, Bitcoin Cash, Dogecoin, Ether and Litecoin.
This article will offer a thorough comparison of Robinhood with crypto-only exchanges and review the best options available to those aspiring to enter the world of crypto investing.
How to Buy Crypto on Robinhood
As a new investor on Robinhood, you can begin the crypto buying process by logging into your Robinhood account via the desktop or mobile apps. You will need to transfer money from your bank account, which will be held as “brokerage cash” on the Robinhood platform. This deposited amount is now your buying power to buy stocks and crypto via the app.
All crypto trading is done through a separate Robinhood Crypto account, which some users may not be able to access depending on their state or country. States such as Hawaii in the U.S. don’t currently offer crypto trading with Robinhood.
To purchase crypto on the Robinhood app you will need to:
- Navigate to the search icon located at the bottom center of the screen. Then, search for “crypto” to bring up a list of all tradeable cryptocurrencies, or search for the specific cryptocurrency you want to buy.
- Once you have pulled up the list of available cryptocurrencies, make your selection to go to its page. For example, if you select Ether, you will be taken to the Ether trading page. The page will have live pricing data at the top and a chart of activity spanning from “live” all the way through to historical data from five years ago.
- Navigate to the bottom of the screen to choose either the “trade” or “buy” button. The trade option will only be enabled if you already hold some of this crypto with Robinhood. Hitting the “buy” button will take you to a purchasing screen where you can enter the amount of fiat currency you would like to use to buy your crypto.
- The screen will tell you how much in crypto your purchase will get you. For example, 50 USD will only be enough to purchase a fraction of a Bitcoin, whereas it would allow you to purchase multiple coins of lower-valued currencies, e.g. Dogecoin. Review the trade information and ensure you are comfortable with the purchase.
- When prompted, swipe up to confirm and submit your order. You have now invested in crypto!
What Is Buying Power?
Buying power on Robinhood refers to the amount of funds you have available in your account to purchase stocks or cryptocurrencies. You may have other funds already invested in stocks but these won’t be available for investing in other assets unless you sell your shares and convert the funds back to “brokerage cash.”
Robinhood users can acquire more buying power with margin. This means you would be borrowing funds from Robinhood to add to your open trading positions. Investors need to have at least $2,000 in their accounts to be able to use this feature. In addition, users will need to sign up for a Robinhood Gold account to enable margin trading.
Broadly speaking, this option is not recommended for new investors, as margin trading comes with enhanced risk. Users can potentially lose more funds than they have deposited, which isn’t generally the case with regular investing.
Do You Own Crypto on Robinhood?
With Robinhood, users don’t really own their crypto assets. They are not able to purchase Bitcoin or other cryptocurrencies and then transfer these assets from Robinhood to a crypto wallet or cold storage. Users are only able to sell their crypto and pocket their gains in the form of fiat currency.
If you are only looking to take advantage of upswings in the value of cryptocurrencies like Bitcoin and don’t need to own the actual coins, then Robinhood can be a simple and convenient avenue to either buy and hold or to follow shorter-term trading strategies.
However, Robinhood does have plans in the works to enable traders to open crypto wallets and have the option to transfer their crypto holdings off the platform.
Do You Own Crypto When You Use Other Exchanges?
There is a popular saying in the crypto community: “not your keys, not your coins.” This is also true when you hold cryptocurrencies with dedicated crypto exchanges like Coinbase. Although the coins are yours after you purchase them on the exchange, you will not have access to your private keys unless you transfer your crypto assets into an independent wallet or hardware wallet.
Users do have the option to hold funds in their Coinbase wallets, but their crypto assets could at any time be subject to holds or freezes on their accounts.
Which Coins and Tokens Does Robinhood Support?
Robinhood has expanded its offerings to include seven cryptos and has plans to add further assets in response to popular demand. For now, it supports Bitcoin, Bitcoin Cash, Bitcoin SV, Dogecoin, Ether, Ethereum Classic and Litecoin.
How Much Are the Trading Fees?
One of Robinhood’s biggest selling points is its commission-free trading structure. This means that with a standard Robinhood account, users will not need to pay trading fees. It is free to open an account, maintain it and make trades. However, if you are using Robinhood Gold for advanced trading, you will need to pay a monthly subscription fee of 5 USD, in addition to any interest accrued for margin used.
Why Won't Robinhood Let Me Buy Crypto?
If Robinhood doesn’t let you buy crypto, it may be for one of the following reasons:
- You don’t have enough buying power. You can’t use margin for crypto trades, so you will need to deposit enough funds in order to cover your purchase. For example, if you want to buy $50 of crypto, you would need to have the equivalent, full amount in brokerage cash.
- Your account has been frozen. If Robinhood has restricted your account due to activity that went against their terms, you will not be able to buy crypto until the issue is resolved.
- Crypto is not available in your area. If Robinhood has not enabled crypto trading for your country or state, you will not be able to purchase crypto via the app.
How To Sell Crypto on Robinhood
If you already have crypto holdings on Robinhood, you can sell them by navigating from your investment lists to your crypto. Once you have selected the crypto you wish to sell, press “trade/sell” at the bottom of the screen.
You will then see the option to sell all or part of your crypto holdings. Select the amount you would like to sell and review your trade. Once the trade is complete, the value of the crypto you’ve sold will be exchanged back into brokerage cash. You can then withdraw any amount you’d like in fiat currency from Robinhood to your bank account.
Keep in mind that you will need to pay capital gains taxes on any crypto you’ve sold with Robinhood. The platform has easy-to-use tax documents for use that are available on both the mobile and desktop app.
How Does Robinhood Compare?
How does Robinhood compare with other investment brokerages and crypto exchanges? Robinhood does a few things very well. It provides users with a commission-free and streamlined mobile experience for simplified investing. Robinhood’s motto is “Investing for Everyone,” and the company has done a remarkable job of onboarding a new generation of traders.
However, those who are seeking to make long-term investments with vehicles like mutual funds and retirement accounts would do best to look into traditional options like Vanguard. Meanwhile, those who are mainly interested in crypto ownership would do best to purchase their coins via a crypto-specific exchange.
Day Trading on Robinhood
Many use Robinhood for day and short-term trading strategies. The platform is great for these investors as they enjoy zero commission fees and good margin fees. The app is incredibly easy to use and it is easy to trade from anywhere.
Advanced traders, however, may want more from their trading brokerage and software. Companies like Charles Shwab, Fidelity and Ameritrade have been around much longer and provide professional day traders with all the advanced tools they need to do business. They have also started offering commission-free trading in a bid to compete with Robinhood. Whether or not you choose Robinhood as a day trading platform will ultimately come down to which tools and support you need as a trader.
Coinbase vs Robinhood
Unlike Robinhood, Coinbase is a crypto-only exchange. It is one of the most popular in the United States and has seen massive growth over the past two years. Coinbase users can purchase crypto assets and transfer their coins from the platform to third-party wallets or cold storage options. Coinbase users can benefit from a great app and UX, crypto rewards and staking, and a choice between over 50 different crypto assets.
Binance vs Robinhood
Binance is an international crypto exchange that hosts its native token, Binance Coin. With Binance, users can trade over 350 different altcoins and earn money in various ways, including staking and earning interest on their crypto holdings. Binance also offers users a way to trade peer-to-peer (P2P), participate in margin trading, and execute advanced trading methods like futures contracts. It is the largest crypto exchange in the world and offers users a way to stay in control of their crypto holdings by transferring them off the platform.
Kraken vs Robinhood
Kraken is another good option for crypto-specific traders. The platform offers more short-term tools, including advanced charting software, for those who wish to trade options and more with crypto. Kraken positions itself as one of the most trusted exchanges with around-the-clock customer support to help users with their accounts. This is an important feature, as many exchanges have had complaints when it comes to lack of infrastructure and live support. Robinhood has had problems in the past (especially for crypto accounts) when it comes to providing timely support.
Gemini vs. Robinhood
Since 2015, Gemini has offered investors a crypto investing experience with sophisticated features and design at slightly higher trading fees. The platform has launched programs for users to earn up to 7.4% APY on their assets, while offering other benefits like the Gemini credit card. Gemini has a very easy-to-use interface and provides the same trading options as other U.S.-based options, with around 45 coins available. Gemini is another good alternative to Robinhood for those looking to have the option to hold crypto themselves, rather than just to pocket the profits from their crypto trades.