Review: Should you invest in cryptocurrency on Robinhood?

Robinhood has done a great job at helping a younger generation become inspired to invest in the stock market, but let’s review how it holds up in the crypto space.

Unlike stocks, one of crypto’s appealing factors is that users can store their funds offline with no interference from banks or organizations. This feature makes crypto different than any other type of investment as it takes up no physical space, but can be completely owned by you.

Robinhood doesn’t let users take their crypto off of their exchange, which means that one of the main selling features of crypto is unavailable, but is it a dealbreaker for casual investors? My opinion is no. I believe that investors and tech geeks care about different things when it comes to crypto and and this review of Robinhood will focus on what investors want.

The cost of using Robinhood to purchase crypto

Fees / Spreads: Robinhood advertises itself as a place to purchase cryptocurrencies with no fees, but they often times fail to mention that there is a price spread. Currently, the price of Bitcoin appears to be 7135.85 but Robinhood wants to sell it to me for $7143.29, a .1% premium.

This is a competitive price compared to exchanges like Binance US and Coinbase Pro which charge from .1%-.25% per transaction. If you are using the regular Coinbase, fees can climb up to 10% depending on how small your purchase is.

Exchanging for cash: You must exit your crypto position 3 business days before you would like them to appear in your bank. You can still use the funds to invest elsewhere on Robinhood, but in order to turn it into cash, there is a 3 day settlement period.

Coinbase imposes a 9 day settlement period before crypto sold for cash can be deposited to your bank account. Once again, Robinhood comes out on top.

Crypto investment strategies available on Robinhood

Recurring purchases: Setting up automatic purchases is important for investors who are interested in dollar-cost averaging. The DCA method of investing is especially helpful because of how volatile cryptocurrencies are, it’s risky to go all in at one price level. In order to DCA without checking in every week or two, there needs to be a way to set automatic purchases.

Robinhood lacks automatic purchases based on time, but you can purchase by price level. The thing is, you can’t predict future prices so automatic purchases are more helpful for DCA. Coinbase allows users to do this which is an advantage to them.

Day trading: Because of the .1% spread, day trading isn’t horribly expensive on Robinhood, but many other exchanges are able to pay traders for being market makers.

While Robinhood does have limit orders, they do not pay you for making the market. They also lack features such as indicators, proprietary price feeds, stop losses and many other advanced features that day traders use regularly. For day trading, BitMEX, Coinbase Pro, Binance US or FTX are better options.

User experience

User interface: Robinhood knows the aesthetics of what millenals like to look at. They have beautiful graphics, intuitive placements of features.

If I could put the features of other exchanges into the interface of Robinhood, I would in a heartbeat. I have no negative comments about the interface and you can even use it on a desktop web browser.

Accessibility: Again, the placement of features is super intuitive. Your home screen recognizes if you trade crypto or stocks more, and shows relevant information front and center. Your overall return is up top, which is sure to entice investors to open the app and check how they are doing overall.

Every part of the investing process on Robinhood is made easy and convenient in comparison to other exchanges.

Should I use Robinhood to invest in crypto?

I couldn’t find many negative things to say about Robinhood within these simple categories, but there are two dealbreakers when it comes to user preferences and trading on the exchange.

Do you want to own your crypto? If so, absolutely stay away from Robinhood. You will be unable to withdraw your crypto which means that you can never put it into cold storage like a true hodlr. If you want to own your crypto, we’d recommend using Cash App to buy bitcoin, Coinbase to buy the rest, and Exodus as a crypto wallet.

Do you want to dollar-cost average? Well, it’s inconvenient on Robinhood. Dollar-cost averaging has proven to be an effective way to beat crypto’s volatility and we highly recommend that method for new investors. If you don’t want to have to manually buy crypto in certain time increments, we recommend using Coinbase to set up automated purchases.

Do you want to day trade? First off, you probably will lose money. Second, there are better exchanges to day trade on, which we have listed above.

You want one exchange to invest in stocks and crypto? You could be using Cash App to buy stocks and Bitcoin, and you would gain the ability to withdraw your Bitcoin. If you are interested in other cryptocurrencies and don’t care about withdrawing, then Robinhood is the way to go.

Don’t care about any of the above? Then Robinhood is the best exchange out there. Use it, you will be happy.

Some of these criteria are picky, in the sense that users might want the features that they don’t have, but putting in the effort to change exchanges wouldn’t be worth it. Overall, Robinhood is a good place to start investing and if you learn more about crypto later down the road, there will always be alternatives.

After reviewing Robinhood’s crypto features, we would recommend it specifically for new investors looking to only dip their feet into crypto assets.