Robinhood Financial has built quite the name for itself in the consumer finance world. However, the fact that they launched Robinhood Crypto in 2018 has a lot of people giving the trading platform a second look.
Many still are skeptical though... is Robinhood safe for crypto trading?
Robinhood WAS just a mobile app for trading stocks, ETFs, mutual funds and securities. However, since the company added Crypto about 3 years ago, you can do a lot more than just trade stocks for free.
The platform now supports a handful of cryptocurrencies. Robinhood Crypto users can trade bitcoin, Ethereum, Dogecoin, Litecoin, Ethereum Classic, Bitcoin Cash, and Bitcoin SV.
Is Robinhood Easy to Use?
Robinhood is an extremely simple to use trading app. It was built so that more people can open an account and start trading on the stock market... and now trade cryptocurrency.
Once you sign up, you'll have a brokerage account which will also give you access to Robinhood Crypto.
Robinhood is known for running promotions where they give out a free stock once you open and fund your Robinhood Account. This is a pretty unique offer for a brokerage firm and can help you build a diversified portfolio. Robinhood also offers options trading for certain verified users.
Some other features offered by the Robinhood platform includes:
- Cash Management - This is a brokerage account upgrade where users can earn interest on swept cash and get a debit card.
- Robinhood Gold - Is a monthly subscription service that offers members premium investing features. With it, you can trade on margin, get bigger instant deposits and get access to a dedicated customer service team.
How Do You Invest with Robinhood?
You can start investing with Robinhood by connecting your bank account on the Robinhood app.
They allow for instant deposits once your connect your bank account, although the actual withdrawal from your bank could take up to 5 business days.
However, you are limited to only 5 deposits per business day to your Robinhood account. They also allow you to set up automatic deposits from your bank and even direct deposits for your paycheck.
Is Robinhood safe to give my SSN?
In order to verify your identity, you do have to provide a Social Security Number. This is a requirement for all brokerage accounts by the US government.
Even if you plan on just investing in Crypto, you need a SSN to open a Robinhood account.
Investing in cryptocurrency is super simple with Robinhood, you can even buy partial cryptocurrencies instead of buying a full coin. New investors find this appealing so that they can learn more about the cryptocurrency market without investing too much money.
What Are the Fees Charged by Robinhood?
None! They offer free trades (commission free trades).
This is extremely appealing to new investors who want to open a trading account.
For more info, check out my rundown of Robinhood fees.
However, that doesn't mean that it's the best bang for your buck. Of course Robinhood needs to make money somehow...
How does Robinhood make money?
Even though Robinhood offers commission free trading, they still need make money just like any other company or brokerage firm.
Vladimir Tenev and Baiju Bhatt created Robinhood with the goal to allow a new generation of investors to get involved in stocks. In 2018, Robinhood opened it's doors to would-be cryptocurrency investors.
Robinhood makes money by selling new order information to big trading firms aka "makers" and end up taking a percentage of the order value. This practice on Wall Street is known as payment for order flow (PFOF). Since they make money buy selling the order info, they can essentially offer commission free trades.
This means that often times, you might find a better rate of exchange elsewhere. So the current quote for your transaction would look different on other cryptocurrency exchanges like Coinbase or Kraken because they are upfront with their fees.
Additionally, they charge a monthly fee for their advanced trading subscription service, Robinhood Gold.
Can Robinhood Accommodate High-Volume Trading?
For sure, it can! If you are looking to invest a lot of money into cryptocurrency, you can even set up recurring deposits from your bank account to your Robinhood account.
With free trading, it's extremely easy to execute a high-volume trade. However, you do need to keep in mind your daily transfer limit, so just make sure your Robinhood account is properly funded with cash first.
And with a Robinhood Gold account, you can even trade on margin if that is your style, all commission free.
Is Robinhood Secure?
Robinhood is regulated by the Securities Exchange Commission (SEC) since it is a securities brokerage. Although, crypto itself can't be FDIC insured, the funds that you hold in your account is protected by the SIPC up to 250,000 for cash and 500,000 for securities.
Robinhood must follow rules and regulations set by the Securities and Exchange Commission). Robinhood Financial is also a member of the Financial Industry Regulatory Authority also known as FINRA and the Securities Investor Protection Corporation (SIPC)
This give investors a piece of mind knowing that their funds are protected by a reputable company like Robinhood.
They are very clear that cryptocurrency investments themselves are not protected by the Securities Investor Protection Corporation (SIPC). and that Robinhood Crypto is not a member of FINRA or SIPC.
Robinhood encrypts all user passwords using the BCrypt hashing algorithm, which is an industry standard. This means that your Robinhood password is never stored in plain text and is protected from hackers.
They also encrypt sensitive details like your Social Security Number and bank account info.
Naturally, their servers for the mobile and web apps use Transport Layer Security (TLS) protocol to insure user safety and protect sensitive details.
After your initial identity verification, Robinhood will never access your banking credentials. They use third party tools to access bank account info.
Users can also enable 2 factor authentication (2fa) on your app so that they can feel secure while investing.
How Does Robinhood Secure Its Assets?
Robinhood Crypto uses a mixture of hot (online) and cold storage (offline) to store digital assets.
On their website, they claim that the majority of cryptocurrency assets are stored via cold storage, meaning they are held in offline physical locations. However, some crypto assets are in hot wallets in order to support and fund day-to-day operations.
But is this an issue? Is Robinhood safe for your investment?
Conclusion: Is Robinhood Crypto Safe to Use?
Yes, Robinhood is an established brand and Robinhoood Crypto, a subsidiary of Robinhood Financial is actually one of the most trustworthy companies when it comes to cryptocurrency investments.
However, for traders who do more advanced market research, Robinhood might not be optimal, even with the "free trading".
Robinhood is a trading platform that many use to buy and sell ETFs, securities and stocks. But recently they added the option to buy and sell cryptocurrencies. While they aren't a traditional cryptocurrency platform, they do offer 7 coins for investors.
As investors educate themselves, they understand that other cryptocurrency exchanges might offer better rates, more features and better market data.
This is especially true if they plan on trading crypto frequently as opposed to holding it for the long-term. It all depends on your trading strategy.
Regardless, the Robinhood app is a safe and reliable way to invest in crypto. If you are still unsure the answer to "is Robinhood safe?" keep in mind that they now have over 18 million users in 2021. So if you are looking to get started with a cryptocurrency investment, Robinhood would likely be the app for you.
If you are wondering about how Robinhood stacks up against competitors like Coinbase, you can check out my more detailed Robinhood review.
Bottom line, Robinhood provides safe trading for investors with no account minimums, free stock trading and commission free crypto trades. It allows users to access markets and invest money by using a simple mobile app.
Lastly, please do make sure to get a secure hardware wallet to store your cryptocurrency off exchanges when you're holding mid or longterm. I recommend the Ledger Nano X since it's so easy to to use and very safe. If you’re looking for different wallet, I’ve got a detailed list of my favorite crypto wallets here.
Feel free to leave a comment below and I'll personally answer your questions.