If you had ever heard of Robinhood before you heard they were launching a cryptocurrency exchange – you already knew that this was a huge deal. In the stock trading world, Robinhood has revolutionized the way that millennials trade by offering no-fee equities trading on their easy-to-use platform. It has been a solid stock trading system and gained a lot of attention for its no-commission business model.
The fact that Robinhood Crypto was about to be introduced was a big splash in the crypto news space – suddenly Coinbase and Binance had a huge threat looming on the horizon. How could Coinbase possibly survive with a big player like Robinhood jumping into the space with zero fees?
We all patiently waited for the official launch of this new crypto trading platform, only to realize recently that it isn’t the exchange we had originally hoped it would be.
Actually, it’s not really a standalone cryptocurrency exchange at all.
Robinhood Crypto isn’t even close to Binance or Coinbase yet
The new platform launched in just five states a couple days ago: Massachusetts, California, Missouri, Montana and New Hampshire.
— Robinhood (@RobinhoodApp) February 22, 2018
However, the Coinbase Killer, as it turns out, isn’t so scary after all. It’s because, ever since this exchange went live, users have been noticing some annoying facts.
First of all, you can’t withdraw your cryptocurrency investments. Seriously. You can only deposit money and buy coins, but you can’t pull out your funds as fiat – which is a little ludicrous for how much hype this exchange got hyped up as a Coinbase killer (mostly from crypto enthusiasts, to be fair).
Robinhood crypto trading is apparently live in five states now, but advertising it as a Coinbase killer is a far cry from the truth. You can't even withdraw crypto, it's like crypto "investing" only for soccer moms and boomers who don't understand the concept of exchanges.
— Sojiro [FOMO Fountains] (@crypto_sojiro) February 24, 2018
I will NOT use Robinhood till they allow you to withdraw your coins. What's the point of a exchange that won't let you withdraw? Ridiculous
— Crypto Nickzos 🚀📈 (@Cryptonickzos) February 23, 2018
If you take a look on social media, users were the opposite of impressed with this little discovery. A lot of people were quite irritated, actually, and it doesn’t like Coinbase has anything to worry about just yet:
The above screen grab came from here.
Robinhood Crypto isn’t directly exchanging coins
This cryptocurrency exchange doesn’t actually execute crypto-to-crypto trades. They actually trade derivatives that are settled in cash, using other cryptocurrency exchanges. Pay attention to what they say on one of their support articles (shout out to Redditor -cryptotrader- for exposing this):
“Currently, Robinhood Crypto supports market and limit orders for cryptocurrencies. Market and limit orders for cryptocurrencies work similarly to orders for stocks and options. When placing market orders, we display the best available price on Robinhood Crypto, which is based on the exchanges we connect to.”
So, yeah, they are just outsourcing the trading of your coins. In the meantime, you can’t:
- Withdraw any of your coins – which means you are just investing, point blank, without being able to pull out your cash (yet – they did say they plan to support withdrawals).
- Move coins to other wallets. Your investments are pretty much held prisoner on this platform.
- Look up your exchange address when you check a blockchain like EtherScan.io, for example.
Hang tight, though – it will eventually be a real exchange
Sure, the Robinhood Crypto app isn’t technically a cryptocurrency exchange that any right-minded crypto trader would never want to use over Coinbase or Binance ever – ever. But this seems like a temporary situation. They will eventually enable withdrawals and the free trading will be the real deal at some point down the line.
Until then, there are a number of other new cryptocurrency exchanges in the pipeline that are claiming to offer multi-coin trading with no fees. I guess we’ll see how the cookies crumble.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.