Bitcoin (BTC-USD) shot up like a rocket last year, and even its swoon so far in 2018 hasn't dampened interest in the cryptocurrency. As investors aim to become part of the crypto craze, financial institutions are looking for ways to profit by offering modern-day picks and shovels to those pursuing the 21st century equivalent of the gold rush.
Early on, many of the institutions that have sought to provide access to bitcoin investing were upstarts that are unfamiliar to traditional investors. That's changing now, and the popular stock-trading app provider Robinhood just jumped into the mix with a fascinating business move that could lead to a dramatic new upswing in interest in cryptocurrencies.
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What Robinhood wants to do
Robinhood just announced that it would allow some of its customers to start buying and selling bitcoin and other cryptocurrencies like ethereum (ETH-USD) on its trading platform beginning in February. The broker touted that with its new platform, users will immediately be able to see cryptocurrency quotes alongside its traditional stock, exchange traded fund, and options quotes. Robinhood will offer cryptocurrency trading on an always-open basis, seeking to differentiate itself from futures brokers that offer access to bitcoin futures on a more limited schedule that precludes most weekend trading.
The big draw for Robinhood is that crypto trades will be free of commissions. But some investors will also react favorably to the broker's other features. For instance, Robinhood says that users will get instant access to funds when making deposits or selling stocks in order to buy bitcoin and other cryptocurrencies. Even with electronic bank transfers that often involve delays of a day or two, the trading-app provider intends to allow cryptocurrency purchases with a portion of funds without any delay. The broker also touts its "cutting-edge security measures to protect your assets," seeking to address any concerns that would-be bitcoin traders might have about the hacking incidents that have plagued cryptocurrency exchanges.
Cost advantages could be especially important for larger bitcoin investors. Several existing exchanges charge traders on a percentage basis to buy and sell cryptocurrencies, and while that's keeps transaction fees low for those making small purchases with the intent of holding them for the long run, paying costs of 1.5% or more every time you buy or sell makes it difficult for those options to be viable for frequent trading.
Will you be able to use Robinhood's bitcoin trading platform?
In an interesting move, Robinhood is limiting the initial rollout of fee-free crypto trading to residents of just five states. Those in California, Massachusetts, Missouri, Montana, and New Hampshire will get first access to the platform. Robinhood intends to make the platform available to those in other states over time, with the eventual goal of offering it throughout the U.S. market.
Most market watchers believe that increasing access to cryptocurrencies through Robinhood could dramatically boost the number of people actively participating in the crypto market. Robinhood's app has appealed especially to younger investors who are more comfortable with using mobile devices for investing, and having a unified platform that allows looking at mixed portfolios of stocks and crypto assets will cement the idea that bitcoin and its peers can be investments in users' minds. Robinhood certainly hopes that interest in cryptocurrencies will lead many new customers to choose the investing app service for their broader investment needs.
Watch the Robinhood rollout
Robinhood hasn't yet said exactly when the new crypto trading platform will be available next month, but interest in the service has been strong, with more than 400,000 seeking "early access" information as of late Friday morning. Investing in bitcoin is still risky, but a lot more people are about to get an up-close experience of the cryptocurrency markets thanks to Robinhood's offering.
