Hundreds of cryptocurrency exchanges have popped up in the past decade to support the exponential growth of the community. Some of these were catastrophic disasters, others were successful and many were somewhere in between. Coinbase and Robinhood are 2 incredibly popular and user-friendly trading platforms that offer cryptocurrencies.
Investors with different goals may prefer one over the other for their distinct services and fee structures. Coinbase is entirely dedicated to cryptocurrency trading whereas Robinhood focuses on securities with crypto on the side. Commission-free trades and an intuitive user interface have driven millions of new investors to Robinhood since its inception.
Robinhood Crypto is a relatively recent addition to the platform, inspiring new and existing users to diversify their portfolios with digital assets like Bitcoin, Ethereum and Dogecoin. On the other hand, Coinbase has been one of the largest crypto exchanges in the world for years, and it doesn’t seem likely that will change soon.
What is a Cryptocurrency Exchange?
Cryptocurrency exchanges are platforms that offer digital asset trading. Crypto exchanges fall into 2 categories — centralized and decentralized. Coinbase is a centralized exchange because the company acts as a trusted intermediary between traders and has some control over its users’ accounts. Decentralized exchanges (DEXes) like Uniswap utilize code on the blockchain (called smart contracts) to eliminate the 3rd party and allow users to retain complete control of their funds.
Cryptocurrency exchanges differ from stock exchanges in multiple ways. For example, stock exchanges can only offer trading while the market is open (and a little while before and after market hours) while most crypto exchanges are open 24/7. Another large difference that affects smaller investors is pattern day trading regulations. Due to the regulations, stock exchanges can’t let users with less than $25,000 in their account day trade stocks more than 3 times a week.
Cryptocurrencies are not hampered by this regulation and any user (with enough funds to cover transaction fees) can day trade as much and as often as they want to. Crypto exchanges are generally less regulated and thus face a tradeoff between higher-risk assets and more flexibility for traders.
Important Cryptocurrency Exchange Features
Because cryptocurrency is still in a bit of a grey area under current regulations, some exchanges or features of exchanges are banned in certain regions. For example, Coinbase is available in all states in the U.S. except for Hawaii, which has untenable regulatory policies for Coinbase. Also, some specific assets can’t be traded in certain regions like New York City due to regulations. Robinhood supports cryptocurrency trading in all states except for Hawaii, Nevada and New Hampshire.
Active and advanced crypto traders will likely prefer Coinbase over Robinhood for its extra resources, trading data and various other tools helpful in planning and executing trades. Robinhood has a simple interface that facilitates quick and easy trading, but it lacks some of the useful information and tools Coinbase provides. Coinbase also supports over 10 times the number of cryptocurrencies and ensures all user funds are either safe offline in cold storage or completely insured.
What is Coinbase?
Coinbase is a cryptocurrency exchange that strives to help build an open financial system. It wants to facilitate the conversion of fiat currencies into cryptocurrencies and vice versa to provide users with access to more diverse financial opportunities. At the time of writing, Coinbase allows users to trade more than 65 cryptos, and its high volume of transactions translates to slightly better prices on average than many smaller exchanges.
Coinbase supports 2 versions of the platform: Coinbase and Coinbase Pro. Coinbase serves beginners and anyone who wants a simple platform to buy and sell cryptos with few extra technical features. Coinbase Pro is a bit more complex, offering trading analysis tools like moving averages and order books. Coinbase also offers one of the best learning platforms for investors who want to learn the basics. Both versions are free and have unique advantages, despite the unfortunately common strategy of other application developers slapping “Pro” onto the name of existing platforms and adding a $5 price tag.
Coinbase makes it easy to send and receive supported cryptocurrencies with a wallet built into the app. Robinhood doesn’t let you send or receive cryptos at all, which makes them only useful as speculative assets. Decentralized finance (DeFi) applications are springing up every day, attracting users worldwide to lend, borrow, earn interest and much more with their digital assets. To interact with DeFi platforms you need to buy cryptocurrency from an exchange that lets you withdraw or send it, like Coinbase. Purchasing cryptos from Robinhood is perfectly fine for investors who just want to buy and hold, but it eliminates every other use.
What is Robinhood?
Robinhood is an American financial services company that provides stock and cryptocurrency trading. It introduced securities trading to many new investors interested in growing their wealth. Robinhood’s greatest accomplishment was likely its decision to offer commission-free trading to all its customers. These fees were painful to small investors, driving them away from brokerages that charged $6.95 per trade. After Robinhood exploded in popularity over the past few years, other brokerages decided to follow suit and stop charging commissions.
It’s a simple process to sign up for an account on its website or app (on iOS and Android). Robinhood’s main advantage over other brokerages is its simplicity and ease of use. Some competing trading apps provide investors with more research and trading tools, but they may seem too complex and confusing to first-time investors. Robinhood also provides low interest (2.5%) margin trading to Robinhood Gold members, although borrowed funds can’t be used to purchase cryptocurrency.
Coinbase Fees vs. Robinhood Fees
One of Robinhood’s advantages over Coinbase is commission-less trading. It charges small fees that are only noticeable when trading large amounts of securities, but cryptocurrency trades are exempt. Trading cryptocurrencies on Robinhood incurs no fees whatsoever. Coinbase does charge fees, but its fees are still lower than other competing exchanges.
Instead of commissions, Robinhood uses a somewhat controversial strategy called payment for order flow, its highest revenue source. Large market makers pay brokers like Robinhood, Charles Schwab and others to route customers' trades through them. Brokers that employ the strategy argue that customers get better prices this way. However, the claim is difficult to prove because a large portion of trades are hidden and can’t be evaluated. Robinhood doesn’t use this strategy with cryptocurrency trading, although it's important for their financial success overall.
Coinbase charges different fees depending on the platform, payment method used and region you are buying from. In the United States, the flat fee is 4% for credit/debit card transactions on Coinbase. However, when paying with a linked bank account or Coinbase’s USD wallet, the fee is lowered to 1.49%. Coinbase Pro offers even lower transaction fees with an average of about 0.50%. Coinbase provides a useful guide detailing its fees for each region and payment method on its help center.
Security Features on Coinbase vs. Robinhood
Coinbase and Robinhood employ strict security measures to keep customer assets safe. 2-Factor Authentication can be enabled for each platform, ensuring strong login security. Coinbase keeps its users’ USD in FDIC-insured banks with a coverage limit of up to $250,000 per individual. Robinhood is a member of the SIPC, which insures cash and securities owned by its member’s customers in the case the member (Robinhood in this case) fails financially. It covers up to $500,000 with a $250,000 cash limit, but Robinhood Crypto is not insured by the SIPC whatsoever.
A majority of all cryptocurrencies stored by Coinbase and Robinhood are kept in cold storage (offline and encrypted). Coinbase keeps 98% of its users’ cryptocurrencies in cold storage and insures all user funds in hot storage (those kept online for day-to-day trading) in case of a malicious attack. Robinhood says that it insures a portion of its users’ cryptocurrencies, but it doesn't mention the extent of the insurance. Overall, the platforms utilize similar security mechanisms, and they are likely secure enough for the average investor. However, Coinbase is a bit more transparent with its securities measures and might be more secure.
Altcoins on Coinbase vs. Robinhood
Altcoins include all cryptocurrencies other than Bitcoin. Coinbase supports more than 70 altcoins at the time of writing and more are added frequently. Some of the most popular coins listed on the exchange are Ethereum, Dogecoin, Polygon, Cardano and Ripple. Robinhood only offers 7 cryptocurrencies including Bitcoin. It rarely adds more, and its users might miss out on the chance to invest in new and exciting crypto projects. Coinbase is probably the better choice for investors looking to research and purchase a wide range of altcoins.
Altcoins on Robinhood
So, Coinbase or Robinhood?
While each trading platform has its advantages and disadvantages, they are each distinctly better for certain types of investors. Coinbase is the preferable option for users who want more control over their cryptocurrencies, a large selection of altcoins and more learning resources. Robinhood is better for users who want to diversify their investments in stocks and cryptos on a single account. Small traders may also prefer Robinhood for its lack of fees. Both platforms are great for beginners who want to pick up cryptocurrency trading.
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