Robinhood plans to be the USA’s largest cryptocurrency exchange
Robinhood has raised $363 million to try to knock Coinbase from its perch.
Robinhood got its start as a zero fee stock trading app. It was a very, very successful business model, which managed to overtake incumbents like E*Trade and reach a $1 billion+ valuation in just three years.
It took the same model to cryptocurrency in February 2018, testing appetites in 13 states around the USA. It must have found it because a new round of fundraising has brought in $363 million to that end.
"We expect by the end of the year to be either the largest or one of the largest crypto platforms out there. But we also really feel we’ll have the absolute best experience for investing in crypto as well—from having a large variety of coins available to a more favorable cost structure—mainly no commissions—to just quality of product," said Robinhood co-founder and co-CEO Baiju Bhatt.
Even at a time when cryptocurrency exchanges are rapidly growing and innovating, Robinhood's zero commission and UX structure might still stand out as a very compelling offer. Rather than making money from commissions, Robinhood's revenue comes from the Robinhood Gold subscription model, and simply collecting interest on customer deposits.
"We plan on continuing to offer these services for free. There’s no real scenario where we would change that at all,” Bhatt says. "I think we’re pretty relentlessly focused on our mission of making the markets and the financial services system more accessible to the broader population, and that's a pretty good North star for us."
This mirrors a trend seen across other cryptocurrency platforms, which are increasingly doubling down on a customer focus, in the form of lower fees, more accessibility and similar, now that "not being a scam" is no longer the primary selling point for cryptocurrency exchanges.
Its goals put it on a collision course with Coinbase, the current USA number one with about 13 million customers.
Can Robinhood overtake Coinbase?
At a glance, its odds look extremely good. The initial trial round – in 13 states only – had 4 million places and was still oversubscribed.
Even in just a fraction of the county, with a hard cap, it has already managed to make a significant dent in that 13 million benchmark. Removing those limits, and becoming available USA-wide, will likely take it a lot further. It can also draw on its existing customer base of millions of existing stock traders, while Coinbase doesn't have the same luxury.
Add the advantage of zero commissions on top of that, and it seems to have every edge over Coinbase.
But this assumes Coinbase will be standing still the entire time, which certainly won't be the case. If anything, Coinbase is moving even more quickly and in more directions than Robinhood.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, NANO