Robinhood has been a mainstay for people first getting into crypto trading for several years. It has become a financial boon for the company. In fact, more than half of their $565 million transaction-based revenue came from crypto trading. This is crazy when you consider this app is where a good chunk of the AMC to the moon memes started. More on that later.
Robinhood Announces A New Crypto Wallet
Why is this a big deal? In crypto, it’s important to have ways for people to get into and out of with regular currency. Such as the ability to buy crypto with the money in your bank account and also send the money you made from trading crypto to your bank account The more options they have, then the more people that will join the overall cryptocurrency space.
Even though crypto trading brings in millions of dollars of revenue for Robinhood, the app was introduced as a way for newcomers to the stock market who wanted to trade stocks without paying commission fees.
Later as it grew it added the ability to buy and sell crypto which opened the doors for people who never experimented with investing in crypto before. Which made it different from its competitors like Coinbase or Gemini which were primarily crypto-focused.
Previously crypto fans jumped through hoops in order to buy bitcoin and other cryptocurrencies. Fiat onramps are places you can exchange standard currency for crypto and have slowly become easier to use. Since I have joined the space connecting a bank account has become both more normalized and streamlined. But even with this groundswell of innovation, some banks have stiff-armed the change. Several banks have forbidden users from sending money/using money on these apps. Going so far as to decline the transfer. This is where it gets interesting with Robinhood. As stated before, they were initially a place for people to buy and sell stock without commission fees. It helped speed up adoption as more banks began to slowly accept the change.
In Robinhood’s announcement, they mention that you will be able to move your crypto in and out of the app. There is currently a waiting list and they’re planning on releasing it next month. Below is a screenshot from their announcement that shows what the user will be able to do with their new wallet functionality.
Back when Robinhood introduced crypto trading a ton of users including myself bought crypto on the platform. Unfortunately, I quickly realized that what I bought was locked to the platform. Typically if I were to buy from a fiat onramp like Gemini I’d connect my bank account. Similarly, I purchased ETH I could then send it over to my Metamask wallet. And after transferring over the ETH I would then be able to buy NFTs on marketplaces like OpenSea.
If you want to learn more about Metamask and how to get started with your own, be sure to check my Metamask setup guide here.
But what if I had tried that now on Robinhood? Nope. In Robinhood’s current state I could either buy more crypto or sell at whatever the current price was but I’d be unable to transfer it out of the platform. Imagine the disappointment of a newbie grabbing ETH in order to invest in NFTs and other digital assets and realizing they just spent a few hundred dollars that can only be bought and sold within the Robinhood platform.
There are other reasons too for why some users have soured on Robinhood. Just in the past year, Robinhood has had several app crashes when there was a huge market swing in cryptos like dogecoin. And who can forget when they strong-armed users into selling their GameStop stock? You can find a bemusing Reddit video assembled by the community r/WallStreetBets that visually explains the drama of what happened here.
How did they strong-arm their users and why? Earlier this year GameStop‘s stock price exploded past 500%. During the excitement, Robinhood refused to let consumers buy any GameStop stock while still letting institutional inventors like hedge funds like Citadel.
Closing access to retail investors didn’t just lead to upset users, it led to a full-blown SEC investigation. At one point the CEO had to apologize for their handling of the affair.
All in all, this is an exciting development for users of Robinhood. But as the past year has shown it isn’t perfect. It’s important to check out different exchanges to find the one that works best for you. And if you want to store your crypto and NFTs safely in your own hands be sure to check out our hardware wallet article.