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Op-Ed: Stop using Robinhood for Crypto

Stop using Robinhood for Crypto

Robinhood is a reasonably popular way to “invest” in crypto in the United States. During the last bull-run of Dogecoin, many people invested in Dogecoin through Robinhood. Let me tell you why you should stop using their service and find an alternative. 

Previous Actions

Previously we have seen what Robinhood can do to protect its interests. Remember the Gamestop ($GME) (also $AMC, and a few others) trade block that they put that blocked users from being able to buy their stock? They did this to help rescue the hedge funds that were shorting Gamestop. 

Essentially when shorting occurs, you will have to buy back the share at some point to sell it to exit the position. Due to the stock’s overwhelming demand, a finite stock supply could be repurchased to be sold back to leave the short position. When Robinhood prohibited buying more shares, it gave users only one option: sell. So Robinhood interfered with the market.

When the only option you have is to sell, you will essentially be selling your positions back to the hedge funds to exit their short positions, getting let off the hook cheaper than if they didn’t block the buying. If there was no block on buying, imagine how much higher the price could’ve gone, it could’ve liquidated multiple hedge funds just like that. If I am not wrong, they were shorting GME on margin, so they borrowed money to short. 

Essentially Robinhood took this action to protect the interests of the hedge funds. Now you’ve seen their actions, do you think they have your best interests in mind? After seeing their true colors, you should not trust them with your crypto. They do not have your best interest in mind they care about the hedge funds and Wall Street.

The way Robinhood treats Crypto

There is a saying in crypto, “no private keys, not your crypto.” Robinhood takes this to a whole new level. They treat crypto as an asset you can buy, but you can’t do much else with it past that point. The point of you owning crypto is to send it whenever you want, but on Robinhood, you “own” it, but you have no access to the crypto itself. So if you wish to own crypto, you will have to get it elsewhere.

Robinhood does not provide you with the private keys to the wallet that has your crypto. Who knows if Robinhood even has the crypto that they claim you own once you make the purchase? Let’s just say I wish to buy something on Binance Smart Chain. I can buy some crypto like BNB on Binance and move it over to Trust Wallet, to which I have private keys. Then I can trade from there. Can Robinhood do this? No.

So currently, Robinhood wants to expand its crypto capabilities to include “gifting” crypto. This update is still in speculation because this is just code found in the app that hasn’t been implemented yet, but it seems like you will be able to send crypto back and forth only on their platform. This “sending” is not in the spirit of crypto; this is centralized b.s. being pulled by a company that serves the hedge funds and Wall Street entities that are threatened by cryptocurrencies. They do not want you to own crypto.

Even if you buy crypto on Robinhood, you do not own it. We’ve seen from previous actions that they can just block your ability to do whatever you want with the asset you bought and theoretically own. I know I’ve said previously that you do not own the crypto if you do not have the private keys. However, if you hold crypto on Binance, for example, you’re able to withdraw whenever you want as crypto, not just fiat. 

How do I invest in crypto, then?

Our blog has various posts about this topic. If you wish to get your hands on crypto, you can check out a guide here.

I come from a place of passion for crypto and distaste for institutions known for corruption and manipulation of markets without regard if it harms you. You got many great choices when it comes to crypto use them. I get a sense of “us vs. them” when writing this. Crypto puts the power back into people’s hands, don’t give up that power by using terrible platforms made by them.