With the regulators going after centralized crypto exchanges, you might be wondering where you are going to get digital assets. However, thanks to Robinhood, you no longer have to rely on those exchanges to buy or sell cryptocurrencies. This guide teaches you how to buy or sell cryptocurrencies on Robinhood.
Understanding Robinhood
If you are hearing about Robinhood for the first time, then it is a US-based regulated broker-dealer that lets you buy stocks. Unlike most brokers, Robinhood now supports crypto trading. Therefore, users can buy digital assets like Bitcoin within the app.
How to Purchase Cryptocurrencies on Robinhood
Follow these steps to buy crypto on Robinhood:
Step 1: Register an account and deposit funds. While setting up a trading account, Robinhood will ask you to provide an email and government-issued documents for the Know-Your-Customer process.
Step 2: After the broker verifies your details and gives you access to your trading account, use the search bar to look for the crypto asset you want to buy.
Step 3: Once you find your ideal crypto, select it and hit “Buy.” Next, enter the amount of fiat currency you wish to spend on the crypto and press “Review.”
Step 4: After pressing review and checking the details of your transaction, you can then submit your buy order.
Robinhood will send an order confirmation. However, the transaction won’t be settled instantly. It may take a few minutes for your crypto asset to reach your trading account.
How to Sell Crypto on Robinhood
Selling crypto assets on Robinhood is simple. Just follow the steps below:
Step 1: Choose the cryptocurrency you wish to sell.
Step 2: Next, hit “Sell.” You will be directed to another page, where you will key in the amount of the crypto asset you want to sell.
Step 3: Click “Review” to confirm the details of your transaction. If they meet your expectations, submit your sell order.
Similar to buying crypto, Robinhood will send an order confirmation when you place a sell order.
What to Consider When Trading Cryptocurrencies on Robinhood
Trading Fees
Before buying cryptocurrency from any platform, it is important to research the transaction fee charged. As for Robinhood, the broker does not charge any fee on crypto transactions. However, there is always a gas fee to be paid when making crypto transactions.
Robinhood calculates the gas fee for you, and is usually deducted from the transaction amount. Note that the broker does not collect this fee. Instead, it goes to the parties involved in validating crypto transactions on the blockchain.
Restrictions on Crypto Transactions
Robinhood’s crypto services can be accessed by residents of all US states except those in Nevada, New York, and Hawaii. Moreover, the broker only allows users to transact crypto worth $5,000 a day. Daily cryptocurrency transfers are capped at 10.
Wallet Functionality
When you buy crypto on Robinhood, you can choose to store it in your trading account or transfer it to an external wallet. The broker has its own non-custodial wallet that allows users to take full control of their digital currencies. However, it’s worth mentioning that crypto assets stored in Robinhood’s self-custody wallet are not insured by the Federal Deposit Insurance Corporation.
Security Measures
Robinhood prioritizes the security of users’ funds. To protect your cryptocurrencies, the broker holds most of the assets in hardware wallets, making it difficult for cybercriminals to gain access. Moreover, the broker doesn’t lend or trade with users’ funds, and it hires external auditors to examine the platform to ensure it maintains transparency.
Tax Reporting
You are expected to file crypto tax returns when you trade on Robinhood. The broker provides users with cost-basis data to help them file their tax returns. You’re only required to report gross proceeds to the Internal Revenue Service.
Conclusion
Trading cryptocurrencies on Robinhood isn’t a complicated process. However, since it is centralized, many experienced crypto users won’t find it ideal, considering the collapse of centralized exchange FTX, which left users counting losses after their funds were stuck on the platform.
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