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Robinhood Crypto Review: The Pros, Cons and How it Compares

Robinhood makes trading stocks smooth and easy, but what about trading cryptocurrency? Get the rundown in this Robinhood crypto review.

  • Dean Fankhauser
    By
  • Posted
  • Read Time8 minutes
  • Our score

Robinhood review

Our take

4.0

The cryptocurrency market has been one hot trend for investors over the last few years. Experts still project astronomical growth for the market. Some even say it will top $1.4 billion US in the next few years.

If you’re hoping to take advantage of this growing market, you’re likely wondering how to invest in crypto. There are quite a few different coins to invest in, and there are many different exchanges you can use.

One option you have is Robinhood Crypto. Our Robinhood Crypto review examines how this fintech trailblazer performs when trading cryptocurrencies.

What Can Robinhood Crypto Do?

The Robinhood app shook up the investment market when it was first introduced in 2014. It promised to democratize investing and make it easier for the average person. Since then, it’s gained a reputation for making stock trading simpler.

The Robinhood Crypto exchange was introduced in 2018 to handle cryptocurrencies.

The exchange allows users to buy and sell cryptocurrencies at any time. Currencies traded on the exchange include:

Robinhood Crypto also supports Bitcoin Gold, Dash, Lisk, Monero, NEO, OmiseGo, QTUM, Ripple, Stellar and Zcash.

The exchange offers fee-free trading. You can use deposits and funds from crypto sales to buy coins immediately. Other funds, such as sales from ETFs or stocks, become available within three business days.

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Security Features

Cryptocurrency and online trading naturally raise concerns about security. Robinhood Crypto uses both online and offline storage, which improves security.

The majority of coins are in “cold” storage, which means they’re offline. The company also carries insurance to protect against cybersecurity risks, including breaches.

There is both an in-house team and third-party vendors who conduct routine tests. This helps to ensure a higher level of security for trading cryptocurrencies. Robinhood also uses a constantly rotating list of individuals to authorize trades.

Robinhood Crypto Limitations

Robinhood Crypto does have its limitations. One is that you can’t withdraw your coins. The company plans to add coin withdrawal at some point in the future.

You also can’t transfer cryptocurrencies you own elsewhere into your Robinhood Crypto wallet. The company is reviewing options to allow for transferring coins between wallets.

Currently, users have no access to their wallets. That means Robinhood Crypto is primarily a tool for buying and trading coins.

How Does Robinhood Crypto Work?

If you already have a Robinhood account, you may have instant access to funds. A Robinhood Instant account, for example, gives you instant access to funds up to $1,000 for buying crypto. Gold accounts also offer instant access to funds.

Sales from ETFs, options, and stock sales take a little bit longer to arrive. You should have access to these funds after three days.

Proceeds from crypto sales are immediately available. So are limited cash deposits.

Once you have funds available, you can proceed to buy coins. You’ll navigate to the Details page of the currency you want to buy, then enter details about the purchase. You’ll review and confirm your order.

You can buy fractional coins using Robinhood Crypto. This is good news if you want to invest in cryptocurrency, but don't have a few thousand dollars lying around.

Selling Coins

Selling is as simple as buying. You’ll navigate to the currency’s Detail page, then enter details of the sale. You’ll have a chance to confirm and then place the order.

Once you’ve sold coins, you’ll have immediate access to the proceeds. You can use these to invest in another currency.

Protection against Drastic Market Changes

Cryptocurrency prices can be quite volatile. Robinhood Crypto uses a collar to keep your buy/sell prices within a certain range.

A limit order tells the system to buy or sell a specific amount at a specified price. Market orders are adjusted against limit orders, providing a collar.

That means your limit order may not execute if the price moves outside an acceptable range. This can protect sellers against dramatic drops in prices. It also protects buyers safe from huge upswings.

Robinhood Crypto Review: The Pros

Now that we’ve reviewed the features of Robinhood Crypto, it’s time to take a look at how it actually works in practice. What are the pros and cons of using this particular cryptocurrency exchange?

Ease of Use

Robinhood has always scored points for its app design. The company has even won awards for its design in the past. Its crypto exchange follows the same principles.

The app is simple to use, and the interface is inviting. It integrates with new tech, like biometric account security. Use your thumbprint or face ID to unlock your account.

Buying and selling is also simple. Pick your currency. With a couple more taps and a swipe up, you’ve completed your trade.

This breezy interface makes it easy to take advantage of the volatility in the crypto markets. Make a quick buy when prices dip down. Later, when prices rebound, you can sell just as quickly.

The interface makes trading crypto less like a chore and more like a game.

Low Fees

Robinhood’s entire aim is to democratize investing. To help with that, they’ve taken away one of the biggest barriers: trade-based fees.

Normally, you’d pay a fee per trade. That’s not great when trading is easy and fun to do. It’s also not good news when crypto prices are so volatile.

Fees can eat into any profit you might stand to gain on buying and selling. Robinhood joins a couple of other exchanges in doing away with fees.

That means any gains are yours to keep. It also makes it easier for people new to crypto to get started with a few easy trades. The exchange is also more forgiving if you happen to make a poor trade, since you’re not paying fees on top of your mistake.

Robinhood Crypto Review: The Cons

At this point, the Robinhood Crypto exchange probably sounds like a pretty safe bet. A simple, gamified investment experience with zero fees? It’s a great tool to get started.

Like everything, though, there are a few drawbacks to using Robinhood Crypto. We’ve already touched a little bit on the biggest one: functionality.

Robinhood Crypto was introduced in 2018. Two years on, the company still hasn’t made it possible to withdraw your coins. That means all you can do, besides buying and selling, is look at your crypto.

This is a shortcoming, especially given that there are other exchanges that do allow withdrawal. Some of them even have no fees, just like Robinhood.

You can, of course, withdraw your investment to a US bank account. The unfortunate reality of this is you’ll need to pay capital gains tax on any earnings.

Another limitation is the number of coins available. Other exchanges offer a wider range of currency selection. That gives you more options and allows you to diversify your crypto holdings more.

The limited range of coins is complemented by a relative lack of extra features. This is a basic interface for trading. While it’s a great way to get started, it’s not necessarily the right choice for investors who want more.

Lack of Transparency

Another concern about Robinhood Crypto is the lack of transparency about prices.

Some other fee-free exchanges admit they adjust the prices the customer sees. That’s where they make their money. Instead of charging you an upfront fee, they adjust buy and sell prices to create a profit for the company.

Robinhood’s team wouldn’t comment on price setting practices for the app. There’s also some concern their practices may be designed to induce “fear of missing out.” By adjusting prices a particular way, the company can entice users to buy or sell more often than not.

It’s wise for investors to check other exchanges to get a better picture of the market before making a trade.

Security Concerns

Finally, there are security concerns with the Robinhood app, as there are with almost any crypto trading exchange. No large-scale breaches have been reported. There have been isolated account hacks.

The security offered by the company is comparable to its competitors. It's not necessarily riskier or safer to use Robinhood to trade cryptocurrencies.

Geographic Restrictions

Use of the Robinhood Crypto app has expanded over the last two years. When it first launched, it was only available in a handful of American states.

Today, Robinhood Crypto is available only to residents of 47 US States.

Is Robinhood Crypto Right for You?

After comparing the pros and cons, there’s one question left to answer. Is Robinhood Crypto the right exchange for you?

For budding cryptocurrency investors, the answer may be yes. The simple exchange and low fees make this an attractive exchange for first-timers. You may even want to use it as an investing tool to teach youngsters.

If you’re hoping to improve your crypto skills, you may need to look elsewhere. You may want an app that gives you more flexibility and lets you do more.

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Frequently Asked Questions About Robinhood

We’ve compiled some answers to questions we often get. Should you have any other questions, feel free to reach out below in the comments.
Is Investing With Robinhood Safe?
Being a member of the Financial Industry Regulatory Authority and an SEC-registered broker-dealer, they are legally bound to take every step possible to safeguard the investments made by their users. The user funds are insured by the Securities Investor Protection Corporation, popularly known as SIPC. Hence, if Robinhood fails, you can rest assured that your stocks and options investments through Robinhood are insured for a sum of $500,000. It also includes a $250,000 cover for cash.
What Cryptocurrencies Does Robinhood Support?
When it comes to trading cryptocurrencies on Robinhood, it supports Bitcoin, Bitcoin Cash, Bitcoin SV, Ethereum, Ethereum Classic, Litecoin, and Dogecoin. They also offer real-time pricing data for Bitcoin Gold, Dash, Lisk, Monero, NEO, OmiseGO, Qtum, Ripple, Stellar & Zcash.
Is Robinhood Crypto Available Outside the United States?
No, as of now, Robinhood crypto along with other services & products are only available in the United States.
In which U.S. states is Robinhood Crypto Available?
Robinhood Crypto is currently available in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin, and Wyoming.
Do Robinhood Support Crypto Deposits & Withdrawals?
As of now, Robinhood does not allow crypto deposits & withdrawals. They do not even provide crypto users with access to their Robinhood wallet or wallet address.
Are There any Fees on Robinhood?

Investing is free on Robinhood, but there are some charges that Robinhood users have to pay while trading. It includes regulatory transaction Fees, trading activity fees, and American depositary receipt fees. These fees are charged under the direction of the Financial Industry Regulatory Authority (FINRA). 

The regulatory transaction fees of $22.10 per $1,000,000 of principal are charged by Robinhood on behalf of FINRA. Robinhood pays it to FINRA, and they pay it to the Securities and Exchange Commission (SEC). You won't be charged regulatory transaction fees for sales with a notional value of $500 or less. The trading activity fees for equity sells is $0.000119 per share, whereas, for options sells, the fee is $0.002 per share. When it comes to American Depositary Receipts, the users will have to pay $0.01-$0.03 per share as custodial fees to the banks that issue these certificates.

For Stocks, Options & ETFs on Robinhood, debit balances, returned checks, ACH, wire & recall/stop payments, domestic wire transfers, and international wire transfers are free. But for outgoing ACATS, users will have to pay a $75 fee, and for domestic overnight check delivery, the users will have to shell out a $20 fee. 

A Robinhood Financial Gold Planning user will have to pay a $5 fee as the cost for 30 days, and it includes $1000 of margin. For a margin over $1000, a user will have to pay 2.5% of it as a fee.

Pros & Cons of Robinhood

  • No fees or commissions on trading activities on Robinhood.
  • Robinhood offers an easy-to-use trading app, both for Android & Apple users.
  • Your investments are secure for up to $500K by Securities Investor Protection Corporation, in case Robinhood fails.
  • Both traditional investment & emerging investment like cryptocurrencies options are available on Robinhood.
  • Supports weekly, bi-weekly, monthly, and quarterly automatic transfers.
  • No crypto deposits & withdrawal options are available on Robinhood.
  • Robinhood does not support retirement accounts & mutual funds, or bonds.
  • Quite limited in terms of research capabilities.
  • Extremely limited customer support. No phone or live chat service is available for brokerage account holders.
  • Compared to some of the leading crypto exchanges, Robinhood offers fewer cryptocurrencies for trading.
  • Robinhood app is highly prone to failure. It had failed three times in March 2020 alone. It can be a pressing issue for advanced & professional traders.
  • There are geographical restrictions for using Robinhood as only US-baser users are allowed to use Robinhood.
  • Robinhood can place restrictions on your account in some circumstances like being flagged for pattern day trading, which in turn, will prevent you from trading on Robinhood.

Invest in Crypto the Right Way

With luck, this comprehensive Robinhood Crypto review will help you decide if this is the right exchange for you.

If you’re still looking for a trading exchange, or just want to get more information about crypto trading, check out our blog. We have plenty of in-depth reviews and how-to guides that will help you become a successful cryptocurrency investor.

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