Trading Options On Robinhood – How About Cryptocurrency?

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Is cryptocurrency one of the available trading options on Robinhood? Indeed, it is. However, is it worthy of your consideration?

In my opinion, your investments are better off elsewhere, but not everyone feels the same way. As a matter of fact, many people want to use Robinhood.

What Is Robinhood Financial?

Robinhood Financial is an online broker which went public in 2014 as an app for Apple products. An app for Android followed in 2015.

Customers could buy and sell stocks and exchange-traded funds without paying a commission. This was highly innovative and appealed to many young investors.

Lower fees mean not as much money for Robinhood,  which means you forfeit research and trading tools. Mutual funds and bonds aren’t supported, either.

Depending on what you’re willing to forego or seek elsewhere may determine if the savings are really beneficial.

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Robinhood Crypto

Somewhat separate from the main stock services is Robinhood Crypto, which is currently available in 46 states.

I’m not going to list each state since the rest should be on board soon. If you’re looking to start an account with Robinhood Crypto and it’s not available in your state yet, you can join the waiting list.

Get Started

First, navigate to the desired cryptocurrency’s detail page. From your phone, tap Trade, then Buy, then Order Types. Select your order type, confirm the order, then swipe up to submit it. From a computer, enter the amount you’d like to order in the window on the right of the screen. Click Review and then confirm your order.

Not much difference between ordering on Robinhood vs. ordering on Coinbase or some other crypto trading platform.

To sell a cryptocurrency, do the same as above, only instead of clicking on Buy, click on Sell.

Robinhood Crypto supports market and limit orders for cryptocurrencies, which works similarly to orders for stocks and options.

When you place a market order, they display the best available price, which is based on the exchanges to which they are connected. You will never get charged a commission or additional trading fee.

For limit orders, you specify the minimum or maximum price for which you are willing to buy or sell. Since cryptocurrency prices are volatile, Robinhood protects your market orders against dramatic price moves by adjusting market orders to limit orders. These are collared up to 1% for buys, and 5% for sells. Any price difference you see between the estimation and the execution is due to market movement; Robinhood does not profit from it.

Types Of Orders

A limit order specifies a certain price at which the order must be filled, although there is no guarantee that some or all of the order will trade if the limit is set too high or low.

For buy limit orders, the order will be executed only at the limit price or a lower one, while for sell limit orders, the order will be executed only at the limit price or a higher one.

Limit orders are not guaranteed to go through. Your limit buy order will only execute if the cryptocurrency meets or falls below your set limit price, and your limit sell order will only execute if the cryptocurrency meets or goes above your limit price.

A market order simply buys or sells shares at the prevailing market prices until the order is filled. Market orders are transactions meant to execute as quickly as possible at the present or market price.

Market orders do not guarantee a price, but they do guarantee the order’s immediate execution.

Stop orders, a type of limit order, are triggered when a stock moves above or below a certain level and are often used as a way to insure against larger losses or to lock in profits.

Transfers And Deposits

If you have a Robinhood Instant account, you get instant access to your funds – up to $1,000. Additional funds will show in your account after the normal settlement time.

If you have a Robinhood Gold account, you’ll have instant access to your funds up to your Gold tier amount, and any additional funds will be in your account after the usual settlement time.

You can’t use Gold Buying Power to purchase cryptocurrencies on Robinhood Crypto.

For Robinhood Crypto, funds from stock, ETF, and options sales become available for buying within 3 business days. However, all proceeds from sales of crypto are immediately available to instant accounts.

At this time, Robinhood does not support digital coin withdrawals, although it intends to in the future.

They also don’t support transfers of your existing cryptocurrency assets or wallets into your Robinhood Crypto account. Robinhood is still working to protect itself and its customers from fraudulent activity. Such transfers are being worked on as a future ability.

Digital currency held as a capital asset will be taxed as property, and subject to capital gains and losses. Robinhood provides you with your tax documents during tax season. Check out their Tax Center for more information.

Image result for robinhood financial + royalty freeSecurity

Robinhood Crypto keeps most of your coins in cold storage, fully disconnected from the internet. This protects your digital assets from being compromised by hackers.

They also carry crime insurance that protects a portion of the assets held across their storage systems. The policy is underwritten by Lloyd’s, and placed by Aon.

Robinhood’s security team regularly reviews the code and infrastructure powering Robinhood Crypto. They also use third-party security experts to test their systems, which helps boost their security.

Robinhood Crypto practices strict operational security when managing cryptocurrencies. As an example, coin transfers require authorization from a select group of people, which is constantly being rotated. This list of individuals is not released.

Robinhood Crypto is registered with FinCEN as a money services business. Therefore, Robinhood Crypto is subject to the applicable requirements of the Bank Secrecy Act and must comply with the applicable money transmitter laws of U.S. states.

My Personal Take

Although Robinhood is continuing to upgrade and improve its crypto services, I simply don’t feel it’s quite ready yet. I’m not going to try to convince anyone to not use it, though, as the security does seem sound.

However, if you like to play with your crypto on a daily basis, it seems as though Robinhood Crypto is on the slow side.

My personal preference remains Coinbase and its wallet.

Photo of a Woman ThinkingWhat About You?

As always, I respect anyone who makes a decision only after research. If you decide that Robinhood Financial meets your cryptocurrency needs, please let us know! This relatively new program is ready for the next generation.

Where has your research taken you? Please let us know in the comments below!

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4 Thoughts to “Trading Options On Robinhood – How About Cryptocurrency?”

  1. Thanks for the great article it was very useful. I have thought about trying this but wasn’t sure This explains so much. Thanks again

    1. Thank you, Lori! I’m glad you found the article useful. 🙂

  2. Karen

    Thanks for this review of Robinhood. I’m new to cryptocurrency, so I appreciate any information to help make the best decisions on where to invest. I’ve been leaning towards Coinbase, so I’m going to go with them based on your recommendation. Maybe I’ll check Robinhood out again later once they’ve grown some.

    1. You are very welcome for the review. I’m glad you found the article useful. Thank you, Karen!

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