Cryptocurrencies are generating a lot of buzz for how they are changing finance, and decentralizing many of the functions of the banking system. In many cases, investors and traders are turning to cryptocurrencies over stocks and bonds as the returns from rising prices, staking, and higher interest rates has meant better returns. While this can often sound enticing, investors also need to understand clearly what the difference between stock and cryptocurrency is, which we will detail later.
This has resulted in a need to find the right broker to buy and sell cryptocurrencies or stocks through, with plenty of options available. Two of the most popular are Coinbase and Robinhood. Robinhood looks a lot like and operates as a more traditional stockbroker. The app has a limited menu of cryptocurrencies to select from, however, the bread and butter of the app is the stocks and exchange-traded funds (ETFs) available on the stock market.
For investors and traders looking for a cryptocurrency-specific broker, without the option to buy stocks or ETFs, Coinbase is the best option. For cryptocurrency novices, enthusiasts, and experts, Coinbase is the broker of choice for buying and selling decentralized coins and assets.
The fees investors pay are an important factor in choosing a broker, and the kind of asset they want to purchase. Robinhood has an advantage in this department over Coinbase because it does not charge any fees to purchase cryptocurrencies. Investors and traders have the ability to buy and sell their crypto assets as much as they want without any fees. Additionally, crypto does not follow the same rules for day trading as stocks; there are rules for pattern day trading in stocks that do not apply to crypto.
While there are no fees for buying cryptocurrencies on Robinhood, there are some costs associated with a transaction. Investors will need to pay the spread, which is the difference between the bid and ask price.
Coinbase’s fee structure isn’t as simple, and is typically a little more expensive than Robinhood. The fees on Coinbase vary between different coins and tokens, and depending on how you purchase the cryptocurrency and the amount you buy, the fees will change. ON top of the fees for purchasing cryptocurrencies, Coinbase charges a spread of about 0.5% for cryptocurrency sales and purchases. Depending on how volatile the market is for that particular cryptocurrency, that spread can also change.
Fees range, but the primary determining factor is how you pay for your cryptocurrencies. If you buy $100 of Bitcoin with a debit card, the fee is 3.99%, but if you pay with a linked bank account, the fee is a flat rate of $2.99.
Cryptocurrencies are the main and only financial product available on Coinbase, while for Robinhood, cryptocurrency is a small section on the app. Coinbase has dozens of cryptocurrencies listed and available for purchase, while Robinhood currently only has seven. Coinbase also updates their list of available cryptocurrencies regularly and maintains a list of the most popular cryptocurrencies as well.
Coinbase is a cryptocurrency-specific brokerage and exchange and has a wide range of features to support users’ needs. The platform offers a hosted wallet, and a personal wallet as a bonus option if needed. This means you can buy cryptocurrency with cash using your preferred payment method, and store those coins on Coinbase’s hostel wallet. If you want to send those coins to your personal Coinbase Wallet, which is separate from the Coinbase app but perfectly safe and decentralized. In the case users would like to use the Coinbase Pro exchange, they can simply and quickly deposit and withdraw coins from the hosted wallet or personal wallet and take advantage of much lower fees. This means Coinbase is an efficient and effective onramp for new and seasoned crypto users, making the process seamless and simple.
Robinhood is a stockbroker with an extra feature allowing users to convert USD into cryptocurrency. This means you can’t send coins out of the app, or receive them from an outside wallet. This is because there is no hosted cryptocurrency wallet on Robinhood and no option for a separate personal wallet either. The transaction process is much different, requiring users to convert USD into the crypto they want to buy, and then convert it back to USD when they want to sell for a profit or get rid of any holdings. Robinhood CEO Vlad Tenev has noted that the company is working “as fast as possible” to bring a full cryptocurrency wallet to the Robinhood platform. This would allow users to send and receive coins. There was no comment on the ability to buy cryptocurrencies using cash outside of the traditional brokerage model like Coinbase, though.
Both apps are designed to be easy to use and ready from the start with easy-to-understand interfaces. This is because transaction volume is extremely important for both companies and the more people are buying and selling, the more the companies can make. This requires a simple platform with fast and secure onramp capabilities and apps that work reliably. Robinhood and Coinbase have reduced the friction required to learn and execute buy and sell orders, and have made it as fast as buying something online.
This means beginners can jump in whenever they want, and start buying and selling whichever assets they prefer after understanding the difference between stock and cryptocurrency first.
Coinbase is a basic trading platform with fees that can be upgraded to a more complex platform for intermediate-to-advance traders and investors with Coinbase Pro if needed. Robinhood always looks like and operates as a basic and easy-to-use trading platform, without any changes available. For users looking for the easiest and most friction-free trading experience, whether they are trading stock or cryptocurrency, both are well-designed platforms.
The final decision of whether to use Robinhood or Coinbase comes down to what users are looking for in a platform and the type of asset that they want to trade. First, users should understand the difference between stock and cryptocurrency, and make their decision from there.
Robinhood has free stock and ETF trading, with cryptocurrency available. However, with the limited number of cryptocurrencies available and the higher fee structure in place for trading, Robinhood is a better platform for users looking to trade stocks primarily and trade cryptocurrencies occasionally.
Coinbase is a cryptocurrency-specific exchange and platform and is best for users who want to invest in and speculate on the price of cryptocurrencies. The additional benefits of the hosted and personal wallets means you can also send and receive coins using the app, meaning you can use the coins and tokens you buy on the app.
The decision to use Coinbase vs. Robinhood is an intensely personal one and should be weighed carefully before jumping in.