Robinhood vs Coinbase Pro: Decide Which Crypto Broker Is Best for You
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 have 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, however, has resulted in a need to find the right broker to buy and sell cryptocurrencies or stocks. Two of the most popular are Coinbase and Robinhood. So you may be wondering: between Robinhood vs Coinbase Pro, which should I choose?
Robinhood operates and looks a lot like a traditional stockbroker. The app has a limited menu of cryptocurrencies to select from, with the bread and butter of the app being the stocks and exchange-traded funds (ETFs) available on the stock market.
For investors and traders looking for a cryptocurrency-specific broker, Coinbase is the best option. While it lacks the option to buy stocks or ETFs, cryptocurrency novices, enthusiasts, and experts, often choose Coinbase for buying and selling decentralized coins and assets.
Stocks vs. Cryptocurrencies
The first decision you need to make is whether you want to trade stocks or cryptocurrencies. This will determine what you should look for in a broker. This means understanding the difference between stock and cryptocurrency and choosing the one that fits the investor profile best.
Difference Between Stock and Cryptocurrency
A share traded on stock markets represents an equity piece in a company. Buying shares in a company means that you become a partial owner in that company. Often, the price of a stock will rise and fall with the success and failure of the company, and the value of your shares is often dependent on the company’s recent progress and news.
Cryptocurrencies are a digital currency (coin or token) held and traded through a blockchain, a decentralized public ledger that tracks and holds all transactions. Cryptocurrencies do not represent a share or partial ownership of the company that issued it, and generally, it is not tied to any intrinsic value of another asset.
Broker Fees
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.
Range of Cryptocurrencies
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 its list of available cryptocurrencies regularly and maintains a list of the most popular cryptocurrencies as well.
Range of Features
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. A personal Coinbase Wallet, on the other hand, is separate from the Coinbase app but perfectly safe and decentralized.
If a user would then like to use the Coinbase Pro exchange, they can simply 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. These are just some of the Coinbase options available to users.
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.
Simplicity
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. A simple platform with fast and secure onramp capabilities and apps that work reliably allows this.
Robinhood and Coinbase have reduced the difficulty 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 once they gain a solid understanding of the stocks and cryptocurrencies they wish to deal with.
Coinbase is a basic trading platform with fees. It can also be upgraded to Coinbase Pro if needed, a more complex platform for intermediate-to-advanced traders and investors. Robinhood operates and looks like a basic and easy-to-use trading platform, with less support for crypto. For users looking for the easiest and most friction-free trading experience, whether they are trading stock or cryptocurrency, both are excellent options.
Choosing the Right Broker: The Final Decision
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 options. 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. These are the best options Robinhood has for users.
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.
Understanding the difference between the two will also help you if you are looking to invest in Coinbase stock or Robinhood stock.
The decision to use Robinhood vs Coinbase Pro is an intensely personal one and should be weighed carefully before jumping in.
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