In brief
- Robinhood will let customers make weekly and even daily recurring purchases for as little as $1.
- The offering provides a way for customers to buy crypto gradually and hedge against volatility.
Robinhood announced a new feature on Wednesday that will let its crypto customers acquire as little as a dollar worth of coins on a monthly, weekly, or even daily basis.
This type of buying, known as recurring purchases or dollar cost averaging, is a common investment strategy in the world of stocks and is viewed as a useful way to hedge against swings in the market.
According to the COO of Robinhood Crypto, Christine Brown, the ability for investors to acquire small amounts on a regular basis is especially useful when it comes to the cryptocurrency markets, which are especially volatile.
"This allows customers to take a long term approach to crypto," Brown told Decrypt.
She added that the recurring purchase feature may be especially appealing to those who are new to crypto and intimidated by the market's frequent crashes—such as the one on Tuesday that saw BitcoinBitcoin and EthereumEthereum plunge as much as 15% before partially recovering.
In announcing the feature, Robinhood touted that any recurring feature will come with no fee or commission, contrasting this to other crypto platforms where transaction fees can be up to 4%. The comment may have been an implicit dig at Coinbase, the largest crypto retail service, which charges a fee on every transaction, and which is shaping up to be Robinhood's biggest strategic rival.
Robinhood vs Coinbase: The Coming Clash
When Robinhood filed its papers to go public this week, it revealed a lot about its crypto operations. The popular quick-swipe trading app reported over $11 billion in Bitcoin and other digital holdings for its customers, and revealed that 6% of its Q1 revenue came from Dogecoin alone. And this is just the beginning: In the coming year, Robinhood plans to let customers move crypto off and on its platform—just like the pure-play crypto companies allow. This is all good news for crypto fans, in p...
Robinhood isn't providing its crypto services for free, of course. The company makes money by obtaining rebates when it passes along bulk orders to crypto liquidity providers—rebates that it keeps for itself—but Brown says this system lets consumers obtain far better value than would at fee-based platforms. She also noted that some competitors charge higher rates for recurring purchases than for one-off transactions—creating an incentive for consumers to make larger single purchases rather than frequent smaller ones.
Robinhood's announcement comes at a time when the company—which is best known as a place to buy stocks—is seeing its crypto business expand dramatically. On a recent earnings call, Robinhood disclosed that the majority of its first time customers last quarter bought crypto rather than stocks.
The company has also hinted at much bigger crypto ambitions, including a plan to add more coins beyond the seven if offers now, and the launching of a stand-alone crypto walletwallet. Robinhood has been cagey about the timing of these offerings, however, and Brown declined to comment on whether they would arrive by the end of the year.
Robinhood's recurring crypto purchase is rolling out gradually starting today. The company says all customers will be able to use it within a month.
This story was updated to clarify the nature of Robinhood's crypto business model.
