Popularizing free stock trading, Robinhood to launch commission-free cryptocurrency trading
Robinhood, the California brokerage known for popularizing free stock trading, plans to launch commission-free cryptocurrency trading, the company said on Thursday, riding a wave of interest from retail investors for the new asset class.
The firm announced Thursday that users in 5 states would be able to trade Ethereum and bitcoin, the two most popular virtual coins, 24/7 on its app for free starting in February.
Baiju Bhatt, the cofounder of Robinhood, told Business Insider that cryptocurrencies are something he and his cofounderVlad Tenev have been thinking about for a while.
“Back in 2010 or 2011 we were mining bitcoin,” Bhatt said in a telephone interview. “If we noticed one thing about cryptocurrencies it is that they have this incredible resiliency to them.”
Founded in 2013, the app offers commission-free stock trading in an effort to increase access to the market for those who would otherwise be put off by exorbitant fees. The site offers to aim the same for a variety of cryptocurrencies with the newly launched Robinhood Crypto feature.
Cryptocurrencies are digital coins whose values are not backed by central banks or hard assets, and whose trading is largely unregulated. Ownership of cryptocurrency is tracked through encrypted online ledgers known as blockchains which have attracted the interest of traditional financial institutions.
Cryptocurrencies are normally bought and sold on exchanges where customers trade them for fiat currencies or other cryptocurrencies.
Currently, Coinbase, one of the world’s largest cryptocurrency platforms, charges U.S. customers a 1.5 to 4 percent fee for transactions.
Some of this money goes to pay the miners who maintain each cryptocurrency’s blockchain. So, how does Robinhood plan on doing the same thing for free?
Coinbase and Robinhood were founded around the same time about five years ago and are part of a small crowd of fintech startups with valuations exceeding $1 billion. Coinbase, one of the world’s largest cryptocurrency exchanges, makes money by charging the buyer and seller a fee. It’s easy to see why Robinhood wants in on the action. While Robinhood added more than 300,000 accounts in November and now has more than 3 million users, Coinbase has grown more rapidly, to more than 13 million as of late last year.
The company earns money by collecting interest on customer deposits and by directing orders to certain trading venues. It also offers a premium paid account for $10 per month, which gives users added features.
Starting Thursday, users will be able to add 16 cryptocurrencies to their watchlists, allowing them to monitor the latest news and price information for those coins alongside the stocks they are interested in.
The listed cryptocurrencies are bitcoin, Ethereum, Bitcoin Cash, Litecoin, Ripple, Ethereum Classic, Zcash, Monero, Dash, Stellar, Qtum, Bitcoin Gold, OmiseGo, NEO, Lisk, and everyone’s old favorite, Dogecoin.
The Palo-Alto based startup plans to add more cryptocurrencies in the coming months.
Founded in 2013, Robinhood was valued at $1.3 billion in its most recent round of venture capital funding in April.