Robinhood Crypto: Safe Investment Or Risky Business?

Robinhood is a well-known stock trading app that also offers cryptocurrency trading. It is a popular platform for investors looking to trade cryptocurrencies with no commissions. While it offers benefits such as low costs, security measures, and the convenience of managing stocks and cryptocurrencies in one place, there are also drawbacks. These include limited functionality, fewer educational resources, and a smaller selection of cryptocurrencies compared to dedicated crypto exchanges. So, is it safe to invest in cryptocurrency on Robinhood?

Pros and cons of using Robinhood to buy cryptocurrency

Robinhood is a well-known stock trading app that also allows users to buy and sell cryptocurrencies. Here are some pros and cons to consider when deciding whether to use Robinhood for investing in cryptocurrency:

Pros:

• Low fees: Robinhood offers commission-free trading, which is a significant advantage over many other platforms that charge expensive fees. While Robinhood does make money on the spread between buy and sell prices, there are no additional fees for trading cryptocurrencies.
• Simplicity: Robinhood has a simple and user-friendly interface, making it easy for users to buy, hold, and sell cryptocurrencies with just a few clicks.
• Security: Robinhood prioritizes the security of its users' crypto assets. The majority of coins are stored in cold wallets, entirely disconnected from the internet, providing an additional layer of protection. They also have crime insurance against theft and cybersecurity breaches and conduct routine security reviews and engage third-party experts to test their systems.
• Convenience: Robinhood allows users to hold both their stock investments and cryptocurrency in one place, which is convenient for those who want to manage their entire investment portfolio in one app.

Cons:

• Limited functionality: Robinhood's cryptocurrency platform only allows users to buy, hold, and sell. Users cannot transfer cryptocurrencies to other wallets, spend them on purchases, or receive them from others. This lack of functionality may be a drawback for those who want more control over their crypto assets.
• Fewer educational resources: Robinhood offers limited educational content compared to other platforms. It is primarily a platform for buying, holding, and selling, without the extensive features and resources provided by dedicated cryptocurrency exchanges.
• Limited coin selection: Robinhood offers a smaller selection of cryptocurrencies compared to other platforms. While it includes popular options like Bitcoin and Ethereum, it may not be suitable for those interested in investing in smaller or less common coins.
• Not suitable for active traders: Robinhood's platform is more suited to long-term holding. Active traders may prefer other platforms that offer more advanced trading tools, a wider range of coins, and the ability to transfer funds between wallets.

Security measures to protect your cryptocurrency on Robinhood

Robinhood has implemented several security measures to protect your cryptocurrency investments. Firstly, they store the majority of your coins in cold storage, which is entirely offline and disconnected from the internet, providing an extra layer of protection. They also carry crime insurance to safeguard assets across their storage systems against theft and cybersecurity breaches. This insurance is underwritten by Lloyd's syndicates, the leading global insurance marketplace.

Robinhood's security team routinely reviews the code and infrastructure powering Robinhood Crypto, and they engage third-party security experts to test their systems, ensuring they are secure. They also practice strict operational security, for example, requiring authorization from a select, constantly rotating group of individuals for coin transfers.

Robinhood offers two-factor authentication (2FA) for your account, which requires two sources of verification: something you know (your password) and something you have (a one-time verification code or device approval request). This protects your account even if someone knows or guesses your password. All new devices are also protected with 2FA.

Robinhood also takes measures to protect your personal information. They hash and scramble your passwords, making them difficult for attackers to crack. Sensitive information, such as your Social Security number, is encrypted before storage. Additionally, their app and website use the Transport Layer Security (TLS) protocol to ensure secure communication with their servers, keeping your personal and account information private.

To further protect your cryptocurrency, it is recommended to use a password manager and create unique passwords for each site, along with two-factor authentication. For larger crypto investments, consider purchasing a hardware wallet for added security.

Comparison of Robinhood with other cryptocurrency trading platforms

Robinhood is a popular brokerage app for investors who want to trade cryptocurrency and conventional assets. It offers commission-free trading in 18 cryptocurrencies, including popular options like BTC, ETH, DOGE, SHIB, AVAX, LTC, UNI, ETC, LINK, and XLM. Robinhood also allows users to transfer crypto to and from other crypto wallets without charging any deposit or withdrawal fees. The platform offers 24/7 customer support and provides advanced trading tools such as custom price alerts and advanced charts. Additionally, Robinhood provides industry-leading security with cold storage for the majority of customers' coins and crime insurance against theft and cybersecurity breaches.

When compared with other cryptocurrency trading platforms, Robinhood has its advantages and limitations. Here's how it stacks up against some alternatives:

Fidelity

Fidelity is one of the largest brokerages in the country, managing trillions of dollars in assets. While it doesn't offer cryptocurrencies, it provides a comprehensive brokerage service that includes stocks, bonds, mutual funds, ETFs, options, FOREX, and precious metals. Fidelity also has excellent educational resources and 24/7 customer support through phone, email, and live chat. It is a great alternative for beginners looking for a comprehensive investment platform.

Acorns

Acorns is a mobile-first investment app that is geared towards long-term savers. It offers a unique feature called "round ups," where it invests the change from your everyday purchases. Acorns provide diversified portfolios based on your risk tolerance. However, if you're looking to invest in individual stocks, Robinhood offers more freedom and flexibility.

Crypto.com

Crypto.com is a dedicated crypto platform that offers a wide selection of crypto assets, staking functionality, DeFi web browsing, and low fees. It received a 5-star rating on NerdWallet's roundup of the best crypto platforms and exchanges. While Crypto.com provides more advanced crypto features, Robinhood's simplicity and free crypto trading may be more appealing to some users.

Webull

Webull is a relatively new platform that offers a similar experience to Robinhood, including commission-free trading in stocks, options, ETFs, and cryptocurrency. Webull provides more advanced tools for intermediate and advanced traders, but it may have a steeper learning curve for beginners. Robinhood, with its user-friendly interface, might be more accessible for those new to crypto investing.

In summary, Robinhood is a user-friendly platform that offers commission-free crypto trading and supports a range of popular cryptocurrencies. However, alternatives like Fidelity, Acorns, Crypto.com, and Webull may provide more comprehensive investment options, advanced tools, or educational resources, depending on an investor's specific needs and preferences.

Functionality and features of Robinhood's cryptocurrency trading platform

Robinhood is a popular choice for investors looking to trade cryptocurrencies. The platform offers commission-free trading, allowing users to buy and sell crypto without incurring additional fees. With Robinhood, users can access some of the lowest costs for trading crypto on average in the US. This means that users can get up to 3.6% more crypto compared to other platforms.

Robinhood offers a wide range of popular cryptocurrencies and stablecoins, including BTC, ETH, DOGE, SHIB, AVAX, LTC, UNI, ETC, LINK, and XLM. The platform also provides advanced trading tools, such as custom price alerts and advanced charts, enabling users to build trading strategies and manage their crypto effectively. Users can also set up automated schedules to buy crypto for as little as $1, making it easy to make crypto trading a routine.

Robinhood prioritizes the security of its users' crypto holdings. The majority of users' coins are held in cold storage, entirely disconnected from the internet, providing an additional layer of protection. Robinhood also utilizes hot wallets, which are connected to the internet, to support day-to-day operations. To further safeguard users' assets, Robinhood carries crime insurance that protects against losses from theft and cybersecurity breaches. The policy is underwritten by Lloyd's syndicates, providing an extra layer of security for users' funds.

Robinhood's crypto platform is regulated and licensed, providing additional peace of mind for users. Robinhood Crypto, LLC is licensed by the New York State Department of Financial Services and registered with FinCEN as a money services business. This means that Robinhood Crypto complies with the applicable requirements of the Bank Secrecy Act and applicable money transmitter laws in the US.

While Robinhood offers a user-friendly platform and competitive pricing, it may not be the best choice for those seeking more advanced functionality. It is important to consider your specific needs and goals before choosing a cryptocurrency trading platform.

Eligibility requirements for signing up for a Robinhood Crypto account

To sign up for a Robinhood Crypto account, you must meet the following eligibility requirements:

• Be 18 years or older
• Have a valid Social Security Number (SSN). Please note that a Taxpayer Identification Number will not be accepted
• Have a legal residential address in the United States 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 hold a valid U.S. visa. It is important to note that a U.S. visa may not be available for citizens of countries subject to U.S. sanctions, as administered by the Office of Foreign Assets Control (OFAC). Citizens of these countries may need to provide copies of a valid U.S. passport, Permanent Resident Card, or U.S. immigrant visa

Robinhood is committed to complying with U.S. government laws and FINRA rules, including the USA Patriot Act of 2001. As part of this, they will verify your identity and ensure you do not appear on any lists of terrorist organizations.

To sign up for an account, you will need to provide your legal name, email address, phone number, date of birth, residential address, citizenship status, and Social Security Number. You will also be asked about your investing experience and employment information.

Frequently asked questions