What happens after crypto wallets for Robinhood?

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Robinhood Markets (NASDAQ: HOOD) is taking a big step towards becoming a more serious player in the cryptocurrency market. Last week, it announced it would launch crypto wallets, giving platform traders more common uses for the digital currencies they’ve bought and sold.

It’s a bigger move than you might think. If you are not active in the cryptocurrency market, you may not realize that Robinhood has never been a full player in this game. It allows users to buy and sell seven different types of cryptocurrencies on their platform, but all they can do is resell them when they’re done speculating.

There is no way to spend it on purchases, even in places that accept crypto. There is no way to move them to a different exchange to take advantage of features like staking or lending to generate decent passive income during the ownership process. Launching crypto wallets is the first step in freeing up those accounts to make crypto more functional, but Robinhood Markets had better not stop there.

Image source: Getty Images.

Gaps in the crypto game

Most of the major crypto platforms offer features that Robinhood does not currently make available to its users. The inability to spend crypto as real currency is a glaring blind spot, and that’s something the Robinhood crypto wallet will remedy.

Less desirable for Robinhood (but still necessary to be taken seriously in crypto) is the ability to transfer digital currencies to other platforms. Moving crypto is part of the game, especially as different platforms offer varying rates of income for people willing to stake their tokens or let the exchange lend them. Many platforms also allow you to borrow funds at attractive rates using your crypto holdings as collateral.

Robinhood isn’t a player in any of these niches, but with the freedom of crypto wallets, it won’t be long before the platform updates with these offerings so that it doesn’t lose its traders to pasture. greener.

It should also be noted that Robinhood is not going anywhere if it still only offers seven different cryptocurrencies by the end of next year. It doesn’t need to offer all of the crypto variants available, but how far would it have gone as a platform if it only allowed users to buy seven different stocks or option contracts?

It would be a shock if Robinhood did not introduce its own stablecoin in 2022. Coinbase Global (NASDAQ: COIN) has USD Coin (CRYPTO: USDC), but even some of its smaller rivals including Gemini, Crypto.com and Celsius have their own proprietary cryptographic names. Robinhood will only offer 0.3% interest on inactive cash balances so far.

Let’s also talk about the Robinhood debit card. Right now it only draws from an account’s cash balance, but crypto players are offering more. Coinbase offers up to 4% crypto cashback on purchases with its card. Smaller players are even more aggressive with some of their card offers. It makes sense that the Robinhood debit card is getting closer to crypto, especially since less than 10% of Robinhood’s income comes from stock transactions these days. Crypto options and trading are the real engines of Robinhood right now.

Beyond crypto

Robinhood’s push into crypto wallets is a smart move, but the company can’t overlook the rest of its offerings, either. A hit is that it does not offer mutual funds. You can say that it is not important. Most Robinhood users focus on stock options and crytpo. Traders can also simply buy exchange traded funds to eliminate that mutual fund itch.

Another argument for Robinhood is that no-load mutual funds are available for free without commission almost everywhere. It’s not a game that needs to be tweaked like it did with commission-free trading in the stock market. The counter here is that it would help grow Robinhood’s audience, especially with older investors who feel more comfortable with garden-style mutual funds.

Speaking of funds, it’s good that Robinhood is perpetually updating its users’ top 100 stock holdings list. Isn’t it just a matter of time before Robinhood integrates it as an index fund – even as an ETF?

At the moment, Robinhood is rolling. Revenue soared 131% in its first quarterly report as a state-owned company. In a year in which so many market debuts are interrupted IPOs, Robinhood is trading with a gain. It has 21.3 million monthly active users, who trust it with more than $ 100 billion in assets. The company has come a long way in a short period of time, but the obvious trail is so much longer.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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