How Much Money Will Robinhood Lose As They Offer Free Cryptocurrency Trading?

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Robinhood broke into the stock market scene in 2015 featuring zero-fee trades. At the time the powerhouses of E*Trade and Charles Schwab, among others, were charging anywhere from $4.99 to over $10 for EACH TRADE. Meaning you could potentially be paying upwards of $20 just to get in and out of a position. These fees are quite small for professionals who are moving tens of thousands of dollars. However, they absolutely kill investors in my generation who are just out of college and are typically only investing a few hundred at a time.

I began to use Robinhood in early 2017 and I got an email a couple weeks ago that I saved $690 in trading fees during the 2017 calendar year.

There was something else special about 2017…

Cryptocurrencies began to gain mainstream traction which has led a lot of young investors to shift a large portion of their investment dollars out of equities and into cryptocurrencies like Bitcoin and Ethereum.

It didn’t take long for Robinhood to realize they could have a huge first-mover advantage if they found a way to offer free or near free cryptocurrency trading.

The app, Robinhood Crypto, will initially list the following cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Ripple, Ethereum Classic, Zcash, Monero, Dash, Stellar, QTUM, Bitcoin Gold, OmiseGo, NEO, Dogecoin, and Lisk.

Robinhood Crypto will launch in February 2018 and proves to put some pressure on Coinbase who is currently recognized as the US Market leader in terms of getting initial investments into cryptocurrency.

However, there is one major problem.

According to multiple reports, the folks at Robinhood are attempting to break even from Robinhood Crypto as a BEST CASE scenario. I emphasize “best case” because it is clear to most of the community that this is quite a frivolous claim. There’s a reason the app is initially only being offered to select areas. Offering free equity trading is one thing, but attempting to offer free crypto trades in a market that has no way to allude transaction fees can only lead to one result – eating those costs as a company, which is clearly not a sustainable model.