Stock and crypto trading app Robinhood is looking to raise at least $200 million in a new funding round, Bloomberg reports.
This would value the company at between $7 billion and $8 billion. The cash infusion is coming from existing investors, people familiar with the deal told Bloomberg. The funding talks are ongoing, but the company’s valuation could climb to as much as $10 billion in a subsequent round.
What is Robinhood?
Let’s start with the basics. Robinhood began as a trading app for Android and iOS in 2015 and now has a desktop version available. It allows traders to enter the stock market commission-free (so now you can see where the name comes in). Its founders say: “We believe that the financial system should work for the rest of us, not just the wealthy.”
The app has been attracting Millennials since its inception, and it’s hardly surprising. Of all Millennial retail traders worldwide, some 72% of them describe themselves as “self-directed”. This means that they are confident in using trading tools and apps without going through a traditional broker.
Trading on the app is free, but the bare-bones interface means that traders may need to complement it with other tools as well. A recent NerdWallet review gives the Robinhood app an impressive 4.5 out of 5 stars. However, they also stamp a disclaimer on top of the article reminding readers that Robinhood is a NerdWallet partner.
Robinhood has been dealt a few blows recently too when it was discovered to be selling its customers’ data for millions of dollars to Wall Street trading firms. Somewhat ironic when you consider the messaging of the company about taking back power from traditional investment firms.
Data scandals aside, the venture still boasts over four million users in the US, which means it must be doing something right.
What is Robinhood Crypto?
In January 2018, Robinhood announced that it would be making Robinhood Crypto available for its users in selected states. Just like the flagship app, this also offers commission-free trading.
Starting out slowly, it was originally available in only a handful of states, including its native California, offering just Bitcoin (BTC) and Ethereum (ETH). However, the app has been gradually expanding support for other cryptos.
Robinhood Crypto has now added Bitcoin Cash (BTC), Bitcoin SV (BSV), Ethereum Classic (ETC), Dogecoin (DOGE), and Litecoin (LTC). It is also now available in over 30 states.
Already catering to a millennial base, Robinhood Crypto made perfect sense for its customers and had one million users sign up in the days following its launch announcement.
What’s good about Robinhood Crypto?
The main advantage is obvious – commission-free trading. It doesn’t get much better than free, after all. This is particularly appealing for low-volume, high-frequency traders, who often see a dent in profits from commissions elsewhere.
Users also sing the praises of its simple interface and usability. Targeting such a mobile-heavy demographic, cryptocurrency trading straight from a smartphone reduces a lot of the steps and hassle of regular exchanges.
The sign-up process (provided that you live in the right state) is simple and quick and you can verify your account in a matter of minutes, initiating a bank transfer in under an hour.
Instant verification with many major banks also means users are spared from making micro-deposits. And if you want to make trades of less than $1,000, the process is almost instant. Larger transactions, however, can take several business days.
Where does Robinhood Crypto fall short?
Limited geographical reach aside, there are some major limitations to Robinhood Crypto that prevent it from being a threat to an exchange like Coinbase, for the time being at least.
First of all, there is no way of withdrawing the crypto that the Robinhood app holds for you. Or, to put that another way, you can only sell crypto for fiat, not for other cryptos. Moreover, you can’t use your Robinhood Crypto wallet to deposit any existing coins you may have.
The app is also distinctly lacking when it comes to customer support. There is no one at the end of a phone to call when things go wrong and support can be slow, by email only.
Is Robinhood Crypto hitting the target?
The answer to that question is largely based on where you live and what your stance on double standards and data abuse is.
Currently, there’s just one major competitor in its app-only, commission-free crypto trading corner in the shape of Circle Invest. But backed by Goldman Sachs, it’s a pretty big one.
While Robinhood Crypto is racing to add more states to its app, Circle Invest launched in March 2018 and is already available in 47 states. Only Minnesota, Wyoming, and Hawaii are out of their reach at the moment.
Circle Invest also offers a wider range of cryptos. Add Zcash (ZEC), EOS (EOS), Monero (XMR), Stellar (XLM), Qtum (QTUM), 0X (ZRX), and Basic Attention Token (BAT) to the list.
Wrapping it up
Data scandals aside, Robinhood Crypto is a solid, safe bet for US crypto traders who want to trade commission free. It’s a great chance for newer traders to get their feet wet in crypto in a safe way, and who aren’t looking for a large variety of cryptocurrency options.
Thanks to its market experience in the traditional investment arena, it’s also a good choice for self-directed Millennial crypto investors who want to diversify their investment portfolios.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.