Yesterday it was announced that the Robinhood Trading App would soon be enabling cryptocurrency trading on its mobile platform.
More about that can be read here: https://steemit.com/cryptocurrency/@jrcornel/today-crypto-just-became-a-little-more-mainstream
On first glance, the news sounded good, but there was some debate about how big of a deal this actually was.
Robinhood is not widely used, at least compared to many other popular stock brokerages, and it is only rolling out the cryptocurrency feature in 5 states to start with.
So, exactly how big is this news?
In my opinion, it is potentially huge news!
Robinhood has roughly 3 million users currently, and of those 3 million about 80% would be classified as millennials.
Millennials are the primary purchasers of cryptocurrency.
Which means, there is potential for roughly 2.4 million new buyers to enter the space! Though keep in mind that many that use Robinhood currently are likely the same types that are already invested in cryptocurrency.
However, there is likely to be some new demand for sure.
Then when you add in the fee-free structure and you have potentially a game changer.
A signal of things to come?
Right now Coinbase has a virtual monopoly on cryptocurrency trading in the US. There are not many options for interested investors to get fiat money into or out of cryptocurrencies without going through Coinbase.
For that reason, Coinbase is literally printing money: https://steemit.com/coinbase/@jrcornel/coinbase-is-literally-printing-money
Coinbase doesn't offer the ability to place limit orders and routinely burns traders on the bid/ask spreads as well as charges them a decent sized fee depending on the trade size.
It is not uncommon for traders to expect to pay anywhere from 2%-4% in fees when they make a trade.
That may not sound like much, but try making a trade with $20k and then paying $800 in fees. That is something that will turn away many long time stock traders.
This is where Robinhood potentially could be the big game changer.
They plan on offering fee-free trading.
Yes you read that right, buy and sell crypto, for free!
They will offer a paid premium service and potentially charge some interest for coins held on their exchange, but overall it likely will be much less than the current fees charged by Coinbase.
Which means...
Robinhood could be one of the first real competitors to Coinbase.
If that does turn out to be the case we all will win.
Coinbase will be forced to lower their fees in order to compete and if they don't, we will all use Robinhood (or some other cheaper alternative) for cheaper transaction costs.
This is the beginning of the "race to the bottom" in terms of fees.
We saw it in the 90's and early 2000's with retail brokerages. At first, in order to make a stock trade it would have to be done over the phone with a broker and it would cost anywhere from $50-$300, depending.
Then online brokers starting popping up and offering the same service for $20-$30.
Then as competition increased those fees started dropping lower and lower and lower.
Today you can buy or sell a stock for $10 or less on most exchanges.
Some are even in the $4-$5 range.
I expect we are seeing the very beginning of that same thing happening with crypto.
A few years from now we are going to be sitting around reminiscing about the days when we had to pay hundreds of dollars to make a cryptocurrency trade, though I will imagine we won't be reminiscing on those days fondly.
This is the start of the Race to the Bottom.
Stay informed my friends.
Image Sources:
https://bsahely.com/2016/10/09/why-is-a-focus-on-the-bottom-line-literally-a-race-to-the-bottom/
https://depositphotos.com/6270187/stock-photo-you-and-i-win-we.html
Follow me: @jrcornel