Cryptocurrency trading goes commission-free, if you can wait
TRADERS in cryptocurrencies have to suffer by effectively paying two commission fees on every trade. In addition to the mining fee, a further levy is usually payable to the cryptocurrency exchange once the monies move into fiat (or other cryptocurrencies). However one company, Robinhood, is offering commission-free crypto trading as part of a more extensive portfolio of financial products, and the business strategy appears to be paying dividends.
Robinhood Crypto is a five-year-old business which has raised over US$150 million from investors including Andriessen Horowitz and NEA, and the company is now valued at around US$1.3 billion.
The company regards trading in cryptocurrencies as a loss-leader rather than its primary revenue stream like other exchanges – Coinbase, or GDAX, for example. By combining cryptocurrency trading with traditional stock trading, ETF and options in a single offering, Robinhood encourages a broader range of investors and their funds. It makes its income by placing levies on movements of cash in traditional trades and, of course, can accrue interest on stored monies.
“We’re planning to operate this business [of cryptocurrency trading] on a break-even basis, and we don’t plan to profit from it for the foreseeable future,” said Robinhood co-founder Vlad Tenev to TechCrunch.
“The value of Robinhood Crypto is in growing our customer base and better serving our existing customers.”
Robinhood offers a gold premium tier for between US$6 and US$200 each month which allows traders to borrow between US$1,000 and US$50,000.
The extensive list of cryptocurrencies which can be tracked and traded includes Bitcoin, Ethereum, Bitcoin Cash, LiteCoin, Ripple, ZCash, Monero, Bitcoin Gold, and DogeCoin.
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The free service and trading in many of the available cryptocurrencies are limited geographically at the moment and the company’s three million users (numbers which received a remarkable boost on the announcement of commission-free trading) are joined by over a million people on a waiting list comprised of hopefuls from across the world.
Only Bitcoin and Ethereum will be available to trade for many users. “We’re extremely selective about the cryptos we’re making available on the platform,” says Tenev. “We’re introducing those first because these are the most mature coins that people are trading these days. Multiple times people have declared them dead, and they’ve come back stronger than ever.”
The company offers Android and iOS apps to track and manage trading as well as a web interface. Two-factor authentication is also embedded into the platform, with integrations into third-party authentication apps to help prevent repeats of recent much-publicised crypto hacks.
The company is committing staff to security efforts. “There are several senior world-class people that we’ve hired recently that are building the system in-house,” says Tenev.
Proving truth to the adage that the most fabulous flattery is imitation, Robinhood recently had to issue a cease-and-desist order to upstart Cobinhood which managed to raise US$10 million in an ICO after reportedly copying both the company name and its business plan.
While Robinhood will not be living by the edict of its old-English folklore namesake – to “rob from the rich and give to the poor” – the levy-free crypto trading route appears to be one that will potentially pay the company good dividends and save its customers more than a few dollars too.