On the 7th December 2017, Revolut rolled out a new feature which allows you to buy, sell, and hold cryptocurrency from within their mobile app. While this is clearly a fast, simple, and easy way to buy, sell, and hold cryptocurrencies, it isn't perfect. In this post, I outline the things you need to know, the pros and cons, as well as my opinion on it.

Note: This post only refers to Revolut's in-app cryptocurrency exchange, not the popular process detailed here.

What do you need to know?

Here are the main points I picked out about this new feature:

• You can use it to buy, sell, and hold Bitcoin (BTC), Litecoin (LTC), and Ethereum (ETH).
• It's available to customers in European Economic Area (EEA).
• Originally only available to premium members (£6.99/month), this feature is now being rolled out to all users.
  • Activation instructions here.
• The price is calculated using the volume weighted average price (VWAP) plus a 1.5% markup.
  • This means the price is weighted in favour of the price that has seen the most volume in a defined time period.
  • Price data is derived from Bitstamp.
• Revolut report that the majority of cryptocurrency funds are stored in offline cold-storage vaults.

Pros & Cons

Pros

• This makes buying and selling cryptocurrency fast, simple and easy (see this video). This is exactly what the market needs to onboard newcomers and usher wider adoption.
  • I was able to figure this out and complete a purchase in just a few minutes. That's awesome.
• Can avoid paying excessive currency conversion fees (as BTC/EUR trading pairs are more common than BTC/GBP trading pairs).
  • Revolut handles it all behind the scenes (at the interbank rate).
• You can send cryptocurrency to other Revolut users (details here).
• Great for small-value long-term speculation by newcomers with little or no knowledge of cryptocurrency.

Cons

• Any cryptocurrency stored by Revolut is not safeguarded and you will not be compensated if they get lost or stolen. This is just like leaving your cryptocurrency on an exchange (which you definitely shouldn't do). Exchanges have been hacked in the past.
• You can't send cryptocurrencies outside of Revolut. This means you're locked into the buy/sell price they dictate and can't take control of the cryptocurrencies yourself. If you actually wanted to use the cryptocurrency you'd bought, you wouldn't be able to.
• Using a volume-weighted average price (VWAP) to calculate buy/sell prices means that short-lived price movements are not reflected in buy/sell prices. It's terrible if you're intending to trade.
• Support of hard forks decided on a case-by-case basis.
  • I wouldn't hold out much hope for this.

Should you use this feature?

The main drawback of this new cryptocurrency exchange feature is that it does not allow you to transfer cryptocurrencies outside of Revolut. Newcomers might not appreciate the necessity of storing cryptocurrencies in their own wallet, but it is absolutely critical for larger sums. You cannot trust a 3rd party with decent chunks of cryptocurrency.

For a newcomers first (small) cryptocurrency purchase, it might be a suitable on-ramp which motivates them to find out more about cryptocurrency. It also removes the annoying barriers to entry, such as the delays faced by new customers attempting to sign up to exchanges like Coinbase/GDAX and Bitstamp.

I want to like this, but I wouldn't recommend it in its current state. Newcomers might find it valuable to use temporarily while waiting for Coinbase to fully activate their account, but I don't see the appeal of this beyond that. It's still better to just follow the 1st route detailed in this guide.

Walkthrough

If you're interested in seeing what this looks like, check out this album.

Originally published here.