A Beginner's Guide: Investing In Bitcoin With Robinhood

Robinhood is a trading app that offers an easy and secure way to buy, sell, and trade Bitcoin and other cryptocurrencies. It is a beginner-friendly platform that allows users to buy a limited selection of cryptocurrencies alongside stocks, options, and ETFs. One of the main advantages of Robinhood is that it offers commission-free trading, making it a low-cost option for those looking to invest in Bitcoin. However, it has limited functionality compared to other cryptocurrency exchanges, as users cannot send, receive, or spend their Bitcoin. Additionally, Robinhood offers fewer educational resources and features for more avid cryptocurrency traders. Overall, Robinhood can be a good option for those who want a simple and cost-effective way to invest in Bitcoin, especially if they are already using the platform for stock trading.

Pros and cons of using Robinhood to buy Bitcoin

Pros of using Robinhood to buy Bitcoin:

• Robinhood offers commission-free crypto purchases, which means you can buy Bitcoin without paying any fees.
• Robinhood has a user-friendly interface that is easy to understand for beginners.
• Robinhood offers 15+ main cryptocurrencies, including Bitcoin, and allows you to buy fractional coins.
• Robinhood is available in most states (46-48 out of 50).
• You don't need to wait for funds to settle before investing in crypto on Robinhood.
• Robinhood holds the majority of its crypto in cold storage and carries insurance to protect against theft.
• Robinhood offers 24/7 trading, allowing you to take advantage of short-term price swings.
• Robinhood offers advanced trading tools such as custom price alerts and advanced charts.

Cons of using Robinhood to buy Bitcoin:

• Robinhood offers a limited number of coins (7-15) compared to other platforms like Coinbase, which offer over 90 tradeable coins.
• You cannot transfer coins from Robinhood to an external Bitcoin wallet or use them for third-party transactions.
• Robinhood offers limited educational resources and features for crypto trading.
• Crypto assets on Robinhood are not protected by FDIC or SIPC insurance, so there is a risk of loss in the event of theft or platform failure.

How to buy and sell Bitcoin on Robinhood

To buy and sell Bitcoin on Robinhood, you must first meet the following requirements:

• Be 18 years or older
• Have a valid Social Security Number (not a Taxpayer Identification Number)
• Have a legal U.S. residential address within the 50 states or Puerto Rico (exceptions may apply for active U.S. military personnel stationed abroad)
• Be a U.S. citizen, U.S. permanent resident, or have a valid U.S. visa

Robinhood offers an intuitive, easy-to-use trading application that supports the buying and selling of crypto, stocks, options, and ETFs. It is a beginner-friendly app with no trading commissions. However, there is an order flow fee that varies by trade.

• Search and select the crypto you want to buy or sell
• Enter the amount you’d like to buy or sell
• Select the frequency for this order, such as One-time or Every month
• Swipe up to submit your order
• Select the Actions (down arrow) menu, to confirm the order type, such as Market order, Recurring investment, or Send & Receive
• Select Submit buy or sell to place your order

Robinhood Crypto supports buying, selling, and real-time market data for Ethereum Classic (ETC) and Stellar Lumens (XLM). It also supports real-time market data for Basic Attention Token (BAT), Gemini Dollar (GUSD), Internet Computer (ICP), Wrapped Bitcoin (wBTC), and Wrapped Ether (wETH).

Robinhood Crypto does not charge commission fees for trading crypto. However, it does generate revenue through volume rebates from trading venues. For example, for every $100 of notional value for executed crypto orders, Robinhood receives $0.45 in rebates from its trading venues.

There are some benefits to using Robinhood to buy Bitcoin. Firstly, it offers commission-free trading, whereas many of its top competitors have expensive and complex pricing structures. For instance, Coinbase charges a 1.49% trading fee for most transactions. Secondly, it allows you to have your cryptocurrency holdings and stock investments in the same easy-to-use app.

However, there are also drawbacks to using Robinhood for buying Bitcoin. The biggest drawback is the limited functionality of its cryptocurrency trading platform. You can only buy, hold, and sell your cryptocurrencies; you cannot send, spend, or receive them. Additionally, Robinhood offers fewer educational resources and features compared to other platforms. It is mainly a place to buy, hold, and sell Bitcoin and other cryptocurrencies.

How much Bitcoin can you buy on Robinhood?

To buy Bitcoin on Robinhood, you must first sign up for a Robinhood Crypto account. To do this, you need to be 18 or older, have a valid Social Security Number, have a legal U.S. residential address, and be a U.S. citizen, U.S. permanent resident, or have a valid U.S. visa.

Once you have a Robinhood Crypto account, you can buy Bitcoin by searching and selecting the crypto you want to buy, entering the amount you want to buy, selecting the frequency for this order (e.g. one-time or every month), and submitting your order.

Now, how much Bitcoin can you buy on Robinhood? The position limit for Bitcoin (BTC) is a maximum cost basis of $16,000,000 per crypto. This means you can buy and hold up to the cost basis limit worth of Bitcoin. Note that the value of your Bitcoin on Robinhood may exceed this limit based on market fluctuations affecting crypto prices.

How does Robinhood compare to other platforms?

Robinhood is a popular brokerage app for investors looking to trade in both cryptocurrency and conventional assets. It is known for its ease of use and offers a simple, beginner-friendly interface. The app supports the most well-known coins, including Bitcoin, Ethereum, Dogecoin, and Shiba Inu, which should satisfy the needs of crypto novices. It also supports its own crypto wallet, which is an important feature for the safe storage of crypto investments.

Robinhood has some drawbacks, however. Critics have accused the platform of "gamifying" investing, and it has been the focus of complaints and lawsuits over some of its practices. It also has limited functionality and supports fewer coins than some other crypto platforms. For example, Crypto.com offers a much larger selection of crypto assets, DeFi web browsing, and staking functionality.

Another alternative to Robinhood is Webull, which is very similar in terms of its sleek design and free trades on stocks, options, ETFs, and cryptocurrency. However, Webull also offers tools for intermediate and advanced traders that are not available on Robinhood.

Fidelity is another alternative, although it does not offer cryptocurrencies. It is one of the largest brokerages in the country and is highly rated for its comprehensive brokerage service, excellent educational and research materials, and customer support options.

Acorns is a very different product, geared towards long-term savers. It is a hybrid of a robo-advisor, savings account, and full-service brokerage, offering three tiers of service for three different flat monthly fees.

In summary, Robinhood is a good choice for beginners thanks to its user-friendly interface and low fees, but more advanced traders may find the platform too simple and lacking in certain tools and products.

Is Robinhood a safe platform to use?

Robinhood is considered a safe platform for investors. It is a member of the Securities Investor Protection Corp. (SIPC), which means that any loss of an investor's cash or securities held by Robinhood is protected up to $500,000 in the event the firm fails or goes out of business. This includes up to $250,000 protection for cash holdings. Robinhood is also regulated by the U.S. Securities and Exchange Commission (SEC) and maintains membership in the Financial Industry Regulatory Authority (FINRA).

Robinhood offers additional financial protection per customer account of up to $1.9 million for cash and $50 million for securities. It also provides insurance of up to $250,000 for cash deposits through FDIC-insured banks. All stocks and ETFs on the platform are insured up to $500,000 through the SIPC. Robinhood's crypto holdings are not covered by these policies but are protected by a separate policy that safeguards them in the event of a cyberattack.

Robinhood also employs several security measures to protect its users' assets and personal information. These include penetration testing, password hashing, encryption of sensitive information, and two-factor authentication (2FA).

Despite these security measures, Robinhood has faced challenges and criticism in the past. In 2021, the company experienced a data breach where hackers obtained personal information from millions of users. Robinhood has also been fined multiple times by the SEC and FINRA for misleading customers and outages during periods of market volatility.

While Robinhood provides a safe platform for investing, it is important to note that there are inherent risks associated with any financial app or trading activity. Users should carefully review Robinhood's security measures, policies, and terms of service before deciding to use the platform.

Frequently asked questions