Cryptocurrency is a rapidly expanding market. According to Statista.com, the total dollar market value, or market capitalization, of cryptocurrencies grew approximately 300% in the year 2020 alone. That kind of market value has interested even the most cautious investors. Just like how there are online brokers that cater to every type of investor, several want to appeal to crypto traders. There are online brokerages that include cryptocurrency in their offerings, like Robinhood. On the other hand, a dedicated crypto investor may be more interested in a crypto-focused platform like Coinbase.
Cryptocurrency is a volatile market, though. So, it’s important to find the platform that addresses all of your needs. Here is what you need to know about Robinhood and Coinbase to make that decision. You may also benefit from consulting a trusted financial advisor to see if cryptocurrency makes sense for your portfolio and whether these investing platforms fit your needs.
Overview of Robinhood vs. Coinbase
While Robinhood offers cryptocurrency trading through an account with Robinhood Crypto, it’s not the platform’s main focus. It’s an online brokerage that handles popular investment assets including, U.S. listed stocks, options and exchange-traded funds (ETFs). It appeals to users with its minimal fees and mobile interface. That ease-of-use can set it apart from other platforms, in particular crypto-dedicated companies. Although its simple interface has also gotten Robinhood into hot water for making investments appear too easy-breezy and without consequences and risk.
Coinbase itself suffers a little from its excess complexity, similar to its favored asset. Although the company has been around since 2012, it recently made headlines in April 2021 when it debuted as the first major cryptocurrency to go public on the U.S. stock market. So, it’s one of the most popular options out there. The interface itself is user-friendly and comes with robust research tools. However, it’s not perfect. While it offers many forms of cryptocurrency, it’s only a fraction of the current market. It also comes with a complicated fee structure.
The right cryptocurrency trading platform depends on the investors themselves. Both platforms come with benefits and issue points that could sway or push away any individual. It’s up to the trader to figure out which option best works for the person’s needs.
Robinhood vs. Coinbase: Fees
If you’re looking for a low-cost option to trade, then Robinhood is undoubtedly the winner. It has a straightforward fee system and comes with minimal charges. Using Robinhood, you can trade stocks, options, ETFs, and cryptocurrencies free of commission. It’s also has no account management fees, like inactivity or moving your money around. However, there are costs you will encounter when using Robinhood.
Trading in foreign-listed securities incurs a $50 fee, and if you want to trade through an over-the-phone broker, you’ll have a $10 fee. The premium account, Robinhood Gold, also comes at $5 per month. This service opens up margin trading, which requires a portfolio value of $2,000 (not including any cryptocurrency positions).
It’s important to note before we discuss Coinbase that Robinhood does charge payment for order flow. The cost depends on the trade and is automatically added to the total, which makes it difficult to compare crypto trading expenses plainly.
Robinhood is known for its simple and understandable usage prices. On the other hand, Coinbase’s fee structure is more complex and expensive. There are also two account types to choose from: the regular version and Coinbase Pro.
Coinbase’s standard account charges a fee around 0.5% of the spread on crypto sales and purchases. The exact price is hard to determine, though, since the market changes quickly. There is also a more significant fee based on how much you purchase and what type. This may come at a fixed rate or a varying percentage. For example, if the total transaction amount equals less than or equal to $10, then the fee is $0.99. That price is then compared to the variable expense. Whichever fee is greater is applied to your transaction.
For example, suppose you want to buy $50 of Bitcoin. The flat rate is $1.99. Since you’re trading in the U.S. and using a standard U.S. bank account for the purchase, the variable rate is 1.49%. That totals to around $0.74 cents. So, Coinbase would charge you the $1.99 flat fee because it is higher. You can review more of the platform’s pricing structure here.
This fee scale completely changes when you upgrade to Coinbase Pro. There are no sign-up or holding fees with a Coinbase Pro account. It bases its trading fees on a maker-taker model and bases the percentage based on your position and price tier.
Robinhood vs. Coinbase: Services & Features
Robinhood functions differently than Coinbase. It allows investors to trade in standard assets like stocks and ETFs. However, the main point of comparison between the two is their cryptocurrency offerings.
In terms of numbers, Robinhood offers seven tradable coins. This includes the popular options of Bitcoin, Ethereum and two alternative cryptocurrencies called Dogecoin and Litecoin. By contrast, Coinbase gives market information and descriptions for more 50 cryptocurrencies (but notably, it lacks access to Dogecoin). However, support varies between the different cryptocurrencies, and fees depend on the asset, trader’s country, and payment method. You can review the full list of supported cryptocurrencies for both the regular and pro accounts here.
While that may seem like a limited list in comparison to the overall market, it’s curated. Coinbase focuses its support on the most stable cryptocurrencies.
They both offer upgraded accounts. Robinhood Gold comes at a $5 monthly price and allows investors access to instant transfers up to $50,000, Level II market data, and margin trading. However, the interface stays relatively simple, and the analysis tools are minimal in comparison to other online brokers. In comparison, Coinbase Pro gives users detailed research materials and charts to help them make their trades. Even though it comes without a monthly fee, it is still the more expensive account upfront compared to Robinhood Gold.
Another two popular features of Coinbase are its own crypto wallet and USD-backed stablecoin names USD Coin. The digital wallet is encrypted and allows users to withdraw, store, and trade their crypto.
Robinhood vs. Coinbase: Online & Mobile Experience
Both Robinhood and Coinbase offer interfaces that are user-friendly and relatively intuitive. In particular, Robinhood is well known for its simple mobile app. This platform is the origin point for the company. You can use it to make the same trades that are possible in the online format and access investment information. That includes charts, stock “collections,” and pricing data. It currently holds a 4.1 on Apple’s app store and a 2.4 on Google Play.
By contrast, Coinbase stands with 4.7 stars on Apple’s store and 4.4. on Google Play. It has a minimalist design that beginners can understand. Buying and selling are intuitive; however, there is a slightly steeper learning curve with the Pro account. This is because it has additional market tools that an experienced trader would regularly need, but not a novice trader.
Who Should Use Robinhood?
Robinhood’s overall goal is to open trading up to a wider audience. It accomplishes that through its zero commission fees and user-friendly interface. However, there have been concerns about the platform within the recent year. Namely, the platform put a short squeeze on small investors purchasing GameStop shares back in January 2021. Essentially, it prioritized hedge funds that were experiencing loss over the success of the smaller investors.
The platform has also received criticism for its mobile interface, which contributes to a “gamification” of stock trading. The mobile app’s visuals have been compared to the fun and bright colors of a casino. And, although it recently removed the feature, it used to use animations like confetti to celebrate a trade. These traits encourage users to make hasty decisions. You can read more about the concerns directed at Robinhood on its in-depth review under the section Robinhood: What’s the Catch?
Robinhood still encourages risky trading. Combined with cryptocurrency’s high-risk level, Robinhood may not be the best choice for a beginning investor.
Robinhood plans to expand its cryptocurrency platform and available trading. So, we may see changes soon that affect its targeted audience. Keep an eye out for changes or articles written on Robinhood if you intend to trade using it.
Who Should Use Coinbase?
Coinbase, of course, will appeal to traders who either have experience with cryptocurrency or want to begin trading in it. The interface is clean and generally user-friendly. That can make a big difference to the beginning trader. Advanced crypto traders will also prefer the options for investment strategies and longer list of cryptocurrencies to invest in. It also rewards large trading with its discounted fee tier, but comes with a few considerable fees otherwise. So, if you are looking for low-cost trading you might want to look elsewhere.
Cryptocurrency is a high-risk investment. New traders should research whether it aligns with their financial goals and risk tolerance. A financial advisor can discuss the pros and cons and whether it’s a sound choice for you.
Cryptocurrency is a growing, but volatile market. Even experienced traders should reevaluate their risk level and investment strategy before adding the asset to their portfolio. However, both Robinhood and Coinbase make efforts to appeal to the novice investor. Beginners should feel free to explore their options but stay cautious. Coinbase hasn’t faced the same public concern that Robinhood has seen. That may make it the more appropriate choice.
Still, each trader should make a decision for themselves. Robinhood and Coinbase offer crypto trading with unique perks that may appeal to you. An average day trader with knowledge can use Robinhood’s potential, whereas an experienced trader who moves large amounts would benefit from Coinbase.
- A strong portfolio is a diversified portfolio. If you’re considering whether cryptocurrency is the right choice for your risk level, check out SmartAsset’s free investment calculator. This tool will project your investment’s future worth, which can help you determine if it’s “worth” it to you.
- If you are not experienced with cryptocurrency, investing in it can be challenging and confusing. However, you don’t need to make any decisions alone. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Photo Credit: © iStock/hobo_018, © Coinbase, © Robinhood