Inventory brokerage Robinhood launched no-fee cryptocurrency buying and selling in February 2018 and intends to function cryptocurrency buying and selling as a breakeven enterprise.
Robinhood created its commission-free inventory brokerage in 2013, offering main competitors to present fee-based buying and selling platforms. As a substitute of being profitable from fee charges on inventory and cryptocurrency trades, the corporate takes its income from curiosity earned on money balances, margin lending, and its premium companies.
Free Cryptocurrency Buying and selling
When Robinhood first introduced on the finish of January 2018 that it might be launching zero-fee cryptocurrency buying and selling, reactions inside the crypto and monetary communities have been swift. Inside simply 4 days of the announcement, a couple of million individuals had signed up for early entry to the Robinhood Crypto app. Within the days following the app’s official launch in February, rising curiosity and pleasure sparked a flood of latest prospects – as many as 200,000 per day.
With such an enormous inflow of latest customers wanting to commerce cryptocurrencies, it might be tempting for any change to replace their coverage and cost no less than a nominal commerce price, however Robinhood is sticking to its weapons.
Vlad Tenev, Robinhood founder and co-CEO instructed Fortune:
We don’t intend to make very a lot cash on it in any respect for the foreseeable future.
Tenev’s remark reinforces an analogous assertion made within the firm’s announcement again in January through which he defined a number of the reasoning behind the choice:
The worth of Robinhood Crypto is in rising our buyer base and higher serving our present prospects.
Aiming for Breakeven
In an episode of Balancing the Ledger, Tenev explains that Robinhood is working its cryptocurrency buying and selling arm as a breakeven enterprise. It’s a transfer harking back to Sq. providing its customers zero-fee Bitcoin buying and selling by its Money app earlier this yr. In reality, Sq. just lately introduced that it made simply $223,000 extra on Bitcoin gross sales than it initially paid for the cash in Q1 2018.
So why purpose for breaking even? As Tenev and his co-CEO, Baiju Bhatt, clarify, they view cryptocurrencies as an entry level onto their platform for brand new merchants. The idea is that new merchants will come to the platform initially for cryptocurrency buying and selling, however then develop their pursuits to the opposite extra conventional belongings on which Robinhood reaps greater margins.