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Thursday, May 23, 2024

Robinhood IPO: Why It Might Be Time to Move Your Crypto Out of Robinhood?

Robinhood IPO: Why It Might Be Time to Move Your Crypto Out of Robinhood?

Robinhood revently raised close to $2 billion in IPO. The amount is not very impressive for the company that was valued at $32 prior going public. Robinhood gained popularity during the 2020 pandemic when meme stocks had blown up on social media. The app offering seamless stocks and crypto trading saw a user surge. Along with GameStop and AMC popularity, Dogecoin trading brought more users to sign up.

Robinhood quickly grew from the new interest coming in from investors across the board. The number of users of the stock trading app hit over 22 million before the IPO. Recording a massive 309% revenue jump, moving from $128 million to $522 million in the first quarter.

Should You Move Your Crypto Out Robinhood? – Keep Reading

The reason investors are advised to move their crypto out of Robinhood is a simple one. Cryptocurrencies bought on Robinhood do not belong to you: the coins in fact belong to Robinhood. Investors are not directly buying cryptocurrencies when they purchase them on the trading app. Traders are simply betting on the price of the coin within Robinhood’s crypto pool.

This means investors are simply putting their money on the line, and gambling on whether the price of the crypto will go up or not. At the end of the day, there is simply no crypto that you own there. Investors neither own the coins they’re purchasing, nor do they own a wallet on the Robinhood platform.

This is the most important: Buying cryptocurrencies on Robinhood means that you will never be able to actually transfer out any of the cryptos. This is because these cryptos do not belong to you.

To be able to transfer out your crypto is a whole other process. Investors will first have to liquidate their crypto holdings on the app. Then move the liquidated holdings out of the brokerage. After this, then transfer the liquidated fiat to a cryptocurrency exchange and buy actual crypto.

The process of liquidating the coins also poses a tax liability for the investors. But it is better to rip off that band-aid right now and be done with it. Instead of waiting and letting it become even more of a bigger problem. Doing this will give you full control of your cryptocurrencies. Able to decide what you want to do with your crypto-assets at any point in time.

All in all, this whole process would take an estimated six business days.

Falling Out Of Favor With Investors

Robinhood first started inspiring spite in investors when it had announced back in January it was closing trading on the GameStop stocks. The stock price had risen tremendously due to investors promoting it on social media. This was the birth of the incredibly popular and notorious meme stocks. Robinhood had said the closure was due to clearing firm costs. But many in the investing community believed this was because people had found a way to help “the little guy” make money off the market.

Following this was the restriction of trading meme coin Dogecoin. When the price of the coin had spiked following billionaire Elon Musk tweeting about it. Investors saw this as a deliberate act on the part of Robinhood to sabotage retail investors who were trying to make money from the market.

Robinhood was also fined $70 million for causing “significant harm” to its customers. Triggered by the news of a 20-year-old who had taken his life following Robinhood showing him an incorrect trading balance.

The displeasure on the part of investors shone through on the Robinhood IPO. Stocks of the trading app had a disappointing opening as the stock price closed at $34.82. Following an opening price of $38.

Reddit user r/wildabroad started an insightful short post on the r/CryptoCurrency subreddit. Drawing attention to something that a lot of crypto investors are not aware of:

“If you bought any crypto through Robinhood, you are simply betting on the price of the coin. You DON’T have a wallet nor can you transfer funds out of it without liquidating everything (also causing a tax liability for most people).

The reason we buy crypto is because we don’t need banks to manage our funds and have full control over our assets. When you use Robinhood you are literally doing the opposite of that.”

Source: Robinhood IPO: Why It Might Be Time to Move Your Crypto Out of Robinhood? – Fintechs.fi
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