Cryptocurrency has come a long way in the past several years with it originally beginning as an alternative investment but soon becoming recognized globally by many financial authorities. There is an increasing demand for platforms that offer crypto transactions. A myriad of people are looking forward to diversifying their investment portfolios. Robinhood has been quite popular among many investors and is one such platform. In this article we discuss: Can you buy cryptocurrency on Robinhood? How do you start with Cryptocurrency Trading without using Money?
What is Robinhood?
Robinhood (Commission Free Broker) Robinhood is a financial services company which provides their service for 0% trading face. While the platform launched in 2013 primarily as a stock trading app, it has since expanded to include numerous other investment options. Today, Robinhood allows users to trade stocks, ETFs and options as well as buy cryptocurrencies. The easy to use interface, coupled with its commission-free structure has made it appealing among new and seasoned investors.
The specifics of How to Buy Crypto on Robinhood.
Can you buy Cryptocurrency on Robinhood? The platform has support for Bitcoin (BTC ), Ethereum(ETH), Litecoin(LTC) and also Dogecoin(DOGE). For users, this makes it an easy way to enter the crypto market without going through traditional exchanges and complicated trading methods. But there are several things you need to know about using Robinhood for crypto trades.
Create Account and Verification.
Sign up for an account This includes personal information, like your name, address and Social Security number in order to validate who you are. It’s all pretty simple, and you can do this right on the Robinhood app or website. So after verifying your account, you will have to link up bank accounts in order to fund each investment even though it seems I can only do so. Additionally, Robinhood offers different types of funding methods like bank and wire transfers.
Robinhood allows you to trade cryptocurrencies.
After setting up an account and funding it, you start buying cryptocurrencies. This system makes it sound like an ideal setup that would attract beginners who are new to trading. It takes only a few taps on your smartphone or clicks on the computer to buy and sell cryptocurrencies. They also offer real-time market data and price charts to help you with your trading.
It is noteworthy to mention that Robinhood does not offer crypto-to-crypto trades. That means, if you want to exchange one cryptocurrency for another one (into a stablecoin then crypto-to-crypto) so basically convert an altcoin into bitcoin but not sell it for fiat currency(USD), which is USD value has gone down. This might bring additional costs and may even influence your grand investment plans.
Fees and Costs.
Robinhood One of the biggest draws to Robinhood is that it charges no commissions for its trades. Unlike a majority of the old brokers that commission per trade, Robinhood does not eat into your trade with any commissions. For one, it markets itself as a zero-fee platform, but there are some hidden costs. One way this materializes is through the bid-ask spread (difference between buying and selling price), which could increase your actual cost of trades. This is a common bid-ask spread in financial markets, and it can affect the rates you have to pay for your cryptocurrencies.
In addition to that, Robinhood generates revenue thanks to “payment for order flow,” a lucrative practice where it earns additional income (more on this one in the Charges Section). This does not directly affect the cost of your trades, but nonetheless is something good to know as it gives you a better idea on how the platform makes money.
Security and Custody.
Cryptocurrency investment is potentially very risky and security also should be taken as consideration. Robinhood secures user assets through high-processing encryption and security methods to prevent the loss or theft of your data and money. All the same, don’t forget: Robinhood Crypto is stored in a custodial account, NOT in your possession.
The custody model can have implications for how much control you have over the cryptocurrencies that you own. Robinhood wallets are handled differently from traditional ones where a user has direct control of his private keys unlike with RobinHood holdings whose crypto you hold that will be part o your account but the private key is obfuscated: This translates to being unable to deposit or withdraw your cryptocurrencies from an external wallet, no real utility for the coins outside of trading them on Robinhood.
But the negatives do exist. No support for crypto-to-crypto trades, and custodial model can be limiting. For example, if you want to have more control over your crypto and would like to begin trading in various different cryptocurrencies (like I did), Robinhood will not do.
Alternative Platforms.
For those of you who want something more in-depth than what Robinhood has to offer, there are other options available. The most traditional cryptocurrency exchanges like Coinbase, Binance or Kraken have a wider selection of cryptocurrencies to choose from and trading options available. Such platforms generally come with more features and enable you to have a tighter grasp of your crypto assets, such as direct access for transferring funds outwards.
These exchanges also support crypto-to-crypto trading in addition to a plethora of different order types and more advanced technical tools located on the site itself. They might charge fees for transactions and withdrawals but the extra features you get to exercise far outweighs these costs in comparing experienced traders.
Final Thoughts.
A relatively low-cost and hassle-free means of investing in digital assets is to buy cryptocurrency on Robinhood. Its commission-free trading and ease of use is enticing for beginners. it’s also one among the few platforms with no minimum deposit requirements. But, you will have to take the good and bad with it touching on issues around a custodial model or absence of crypto-to-crypto trading.
Conclusion.
Like any investment, you need to know what exactly it is that you are investing in and why before ever putting your money or time into the venture. Whether you decide to trade through Robinhood or check out other platforms, the most crucial thing in trading cryptocurrencies is that your cryptocurrency investing aligns with both your financial goals and risk tolerance.
With that, Robinhood does not make this talk much in order to provide a good gateway into crypto and it’s important for you to take an honest look at whether or not the functionality they offer lines up with your own needs/philosophies. This allows you to make rational decisions and traverse the mutable terrain of digital assets with a greater sense of security.