How to Buy Crypto on Robinhood
Robinhood, founded in 2013, is a commission-free online discount brokerage that makes trading in the stock market easy. It has made it possible for small retail investors to enter the crypto market and try their skills and luck. Robinhood is a fintech pioneer that provides desktop and mobile apps for stocks, ETFs, options, and cryptocurrency trading.
Read on to learn everything you need to know about the Robinhood platform and how to buy cryptocurrency on Robinhood.
Let's dive in!
What Is Robinhood
Robinhood was founded in 2013 as a mobile app by Vladimir Tenev and Baiju Bhatt and is currently headquartered in Menlo Park, California. It was given the name Robinhood because the idea behind it was to revolutionize the markets and build products that would provide everyone with easy access to the financial markets, not just the wealthy.
Robinhood was the first major brokerage platform to eliminate commissions on stock and options trading. It has become one of the most popular brokerages in the U.S. due to its easy-to-use trading app with no account minimum or monthly fee. Its intuitive interface makes it easy to buy and sell stocks, ETFs, and cryptocurrencies.
However, Robinhood has faced regulatory fines, public scrutiny, and lawsuits in recent years. Additionally, it lacks educational resources and trading tools suited for advanced traders and offers poor customer service. Moreover, Robinhood doesn't provide individual retirement accounts (IRAs), which provide tax advantages for those saving for retirement.
Robinhood Features and Services
Let's look into some of the key features and services Robinhood offers:
Stock Trading
Robinhood supports stocks trading on Nasdaq and New York Stock Exchange and doesn't support trading OTC stocks (over-the-counter). It doesn't support retirement funds, mutual funds, and trading in bonds. It supports investing in Initial Public Offers (IPOs), Options and Margin Trade, etc. Robinhood charges no commission for trading stocks or Options.
Exchange-Traded Funds
Similar to stocks, Robinhood supports ETFs trading on Nasdaq and New York Stock Exchange. Stocks and ETFs were the first services offered by Robinhood. Robinhood charges no commission for trading ETFs.
Cryptocurrency
While most crypto users prefer to trade on crypto exchanges, the number of Robinhood users has grown vastly over the past couple of years. This is thanks largely to commission-free trading, in contrast to major cryptocurrency exchanges that charge a fee for buying crypto.
The number of cryptocurrency tokens available on Robinhood is small, but it has been announced by its CEO Vladamir Tenev that more coins will be listed in the future. Currently, Robinhood only supports Bitcoin (BTC), Bitcoin Cash (BCH), Bitcoin SV (BSV), Dogecoin (DOGE), Ethereum (ETH), Ethereum Classic (ETC), and Litecoin (LTC).
Cash Card
Robinhood has opened the waitlist for its Cash Card, which is like a debit card issued by Sutton Bank. According to the company, their cash card "will allow consumers to choose to round up what they pay for goods and services to the near dollar and invest the difference between that amount and the actual price in whatever assets they choose." Users can also use this debit card to withdraw cash from an in-network ATM.
In addition to the services mentioned above, Robinhood is also in the works to add other services to its basket in the coming years.
Buy Crypto on Robinhood
Robinhood is so popular amongst users thanks to the ease with which one can buy crypto or other assets. All one needs is a computer or a device to download the Robinhood app.
The steps for buying crypto on the Robinhood app are as follows:
Create an Account
Download the Robinhood app on your device from the App Store or the Google Play Store. You can also use the desktop website to create an account on Robinhood. Once you've downloaded the app, it'll ask you to enter some personal information, such as your name, address, email, and social security number, to set up an account.
Transfer Money From Your Bank Account to Robinhood
Once you've successfully entered the information, your Robinhood account should be created. You can start trading and buying crypto on Robinhood instantaneously. All you'll need to do is transfer money to your Robinhood account using your bank account and routing number.
Initially, you can transfer USD 1000 instantaneously from your bank account and begin buying crypto. Users can also opt for a Robinhood Gold account to trade higher amounts of money and benefit from margin trading or other services. New users can also use referral and promotional codes they got while setting up their accounts to avail themselves of discounts or get free stocks. These features and incentives make Robinhood one of the most popular cryptocurrency apps in the USA.
Buy Crypto of Your Choice
After you've deposited money into your Robinhood account, you can search for your favorite cryptocurrency tokens and place a market order to buy them at the current market price. You can also set a limit price to purchase your favorite tokens for the price you are comfortable with. Suppose you wish to buy Bitcoin, but the price is too high, so you can set your limit price to buy it when the price reaches your desired level. The limit price can be used for both buying and selling tokens automatically by simply placing an order beforehand and is beneficial for purchasing crypto at your desired price range without having to check prices every few hours.
Selling your tokens whenever you think you've made enough profits and want to take your money out of the market and into your bank account is just as easy as buying crypto on Robinhood.
Storing Your Crypto
Once you've completed your purchase, the next step is to select a crypto wallet to store your coins securely. While Robinhood stores the crypto that people buy in a mix of cold and hot storage, it's highly recommended to create a private wallet with your own set of keys. Depending on your investing preferences, you might choose between software wallets such as CoinStats Wallet, Trust Wallet, etc., or hardware wallets like Ledger, Trezor, etc.
You can link your crypto wallets to your Robinhood Crypto account to easily track your portfolio, move supported coins into your Robinhood account so you can trade those coins commission-free, etc. To enable crypto wallets, you'd need to verify your identity and enable two-factor authentication. Once you've completed this, it'll take up to 5 business days to review your information and activate your crypto wallets.
Robinhood Shortcomings
While Robinhood remains one of the most popular apps to buy and trade stocks, cryptocurrencies, etc., there are still some shortcomings associated with it. Some of the most common ones are:
- Limited Number of Cryptocurrencies: One of the major drawbacks associated with Robinhood is the very small basket of supported cryptocurrency tokens. While the available ones are very popular and have already built up their market share in the crypto world, they are no longer lucrative investments for traders. Most of the profit-making is done through the altcoins available on other cryptocurrency exchanges such as Binance, Coinbase, etc.
- Lack of Mutual Funds or Bonds: The lack of mutual funds and bonds may make it difficult to build a truly diversified portfolio.
- Limited Customer Support.
- Limited Education and Research Tools.
- Untimely Outages: Robinhood has received criticism for untimely outages and trade restrictions amid market volatility. Due to these outages and other issues, Robinhood had to pay USD 70 million as a penalty to Financial Industry Regulatory Authority (FINRA) in 2021. This was one of the largest financial penalties paid to FINRA.
Conclusion
While Robinhood has its fair share of issues and shortcomings, it remains one of the most popular apps for trading cryptocurrencies in the U.S. Its ease of use and policy of charging no trading or commission fees, no account minimums, or account maintenance fees attract a large number of users.
If you don't wish to trade in small market cap altcoins and are only interested in buying or selling the blue-chip cryptocurrency tokens such as Bitcoin, Ethereum, or popular meme coins such as Dogecoin, then Robinhood is the perfect place for you.
Text source: CoinStats Blog
