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Millennial favorite Robinhood tries to lure crypto traders with no fees

Will zero-fee crypto-transactions be enough to win the exchange wars?

Robinhood is opening the door for millennials to do more crypto trading on the cheap. And what says “millennial” more than a young person taking a photo of something with her iPhone? (via Shutterstock)

Financial services company Robinhood is sailing a rising tide of hype after announcing that it will implement zero-fee cryptocurrency trading. Whether it’s to the tune of huge gains or crushing losses, account holders can use their platform to speculate on bitcoin starting next month, and won’t pay any fees to do so.

Just as cryptocurrency traders might have their preferred coins, they also have their favorite exchanges for buying them. Robinhood is a five-year-old smartphone-based no-fee platform for trading stocks and ETFs. It boasts mainstream street cred as a member of the Securities Investor Protection Corporation that’s registered with the U.S. Securities and Exchange Commission. Last year 2 million people trusted it with their money, the vast majority of whom are millennials.

Now Robinhood hopping aboard the blockchain bandwagon, offering investors a place to manage their conventional stock, options, and ETF right alongside their crypto assets. For now, it starts with tracking functionality for 16 different major cryptocurrencies. The exchange formally opens in February, selling only bitcoin and ethereum. It will operated on a highly limited basis, serving just five states to start: California, Massachusetts, Missouri, Montana, and New Hampshire. The company’s announcement post says more states will be served soon.

Robinhood co-founder Vlad Tenev tells TechCrunch that they’re “planning to operate this business on a break-even basis and we don’t plan to profit from it for the foreseeable future.” Robinhood Crypto is merely a vehicle to increase overall user base and better serve existing users.

It remains somewhat technically difficult to buy and hold bitcoin, so competitive exchanges do what they can to attract people to their platforms. Robinhood’s straightforward proposition of “no-fee crypto trading” will certainly be enough to win some converts. Major bitcoin exchange Coinbase charges 1.49 percent to 3.99 percent whenever a user wants to turn money into bitcoin. It’s going to be tough to compete with free.

By making it easier to buy bitcoin, there’s concern that Robinhood is merely fueling the bitcoin bubble. There were more than 500,000 people on the waitlist on Friday, and that number’s surely only grown since. It’s going to be interesting to see how this scrappy company maintains its conventional regulatory green light while wooing new users from the crypto-crowd.

But it’s telling that Robinhood included the small-print disclaimer that “cryptocurrencies are not stocks and your cryptocurrency investments are not protected by either FDIC or SIPC insurance.”

Dylan Love is an editorial consultant, contributing reporter, and fiendishly curious technology enthusiast. He owns no cryptocurrencies.