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Robinhood CEO: No Plans to Make Money on Cryptocurrency Trading for ‘Forseeable Future’

Stock brokerage Robinhood launched no-fee cryptocurrency trading in February 2018 and intends to operate cryptocurrency trading as a breakeven business.

Robinhood created its commission-free stock brokerage in 2013, providing major competition to existing fee-based trading platforms. Instead of making money from commission fees on stock and cryptocurrency trades, the company takes its profits from interest earned on cash balances, margin lending, and its premium services.

Free Cryptocurrency Trading

When Robinhood first announced at the end of January 2018 that it would be launching zero-fee cryptocurrency trading, reactions within the crypto and financial communities were swift. Within just four days of the announcement, more than one million people had signed up for early access to the Robinhood Crypto app. In the days following the app’s official launch in February, growing interest and excitement sparked a flood of new customers – as many as 200,000 per day.

With such a massive influx of new users eager to trade cryptocurrencies, it would be tempting for any exchange to update their policy and charge at least a nominal trade fee, but Robinhood is sticking to its guns.

Vlad Tenev, Robinhood founder and co-CEO told Fortune:

We don’t intend to make very much money on it at all for the foreseeable future.

Tenev’s comment reinforces a similar statement made in the company’s announcement back in January in which he explained some of the reasoning behind the decision:

The value of Robinhood Crypto is in growing our customer base and better serving our existing customers.

Vlad Tenev, Robinhood founder and co-CEO

Aiming for Breakeven

In an episode of Balancing the Ledger, Tenev explains that Robinhood is operating its cryptocurrency trading arm as a breakeven business. It is a move reminiscent of Square offering its users zero-fee Bitcoin trading through its Cash app earlier this year. In fact, Square recently announced that it made just $223,000 more on Bitcoin sales than it originally paid for the coins in Q1 2018.

So why aim for breaking even? As Tenev and his co-CEO, Baiju Bhatt, explain, they view cryptocurrencies as an entry point onto their platform for new traders. The theory is that new traders will come to the platform initially for cryptocurrency trading, but then expand their interests to the other more traditional assets on which Robinhood reaps higher margins.

Building an Ecosystem

With a current valuation of around $5.6 billion, Robinhood is the second most valuable private fintech company in the world with over 4 million customers trading stocks, ETFs, and cryptocurrencies.

Speaking about the decision to introduce cryptocurrency trading, Tenev explained:

The thinking behind that is what we’re really doing is building an ecosystem. Right now, the products are investing products, so crypto slots in very nicely alongside the 10,000 plus other instruments that people can trade.

Financial Services Customers Are Getting Ripped Off

Tenev believes commission fees are outdated, especially considering the lower costs of operation of modern online exchanges and brokers. Robinhood’s approach is to use technology and automation to reduce costs for customers and it aims to eventually compete with Bank of America across all financial products.

I think it doesn’t stop with just investing products. Customers are getting ripped off across the board in financial services.

Robinhood is planning to add more cryptocurrencies to its existing trading of Bitcoin and Ethereum but is wary of regulatory uncertainty. It will also assess new coins thoroughly.

Do you agree with Tenev? Are traditional financial service providers ripping customers off? Let us know in the comments below.

Images courtesy of Robinhood, AdobeStock

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Deribit Removes Futures Trading Fees for year-End Promotion

Source: bitcoin


Deribit, a bitcoin futures and options exchange platform, has removed all trading fees for the rest of 2016 as part of a promotion to drive more customers to the service.

Disclaimer: This article is sponsored by Bitcoin PR Buzz.

Deribit CMO Marius Jansen offered a simple explanation of the reasoning behind the company’s decision to remove trading fees for the remainder of 2016.

“We want to introduce our platform to anyone interested in Bitcoin futures and options trading,” he said. “So we decided to offer free trading until the end of the year.”

According to the exchange, traders stand to make more profit on the platform now that fees have been removed, which they think will incentivize people to use their service.

Calling itself the “only full-featured Bitcoin futures and options platform,” the company provided press with a list of “key features” traders can find on the exchange:

  • Trading plain vanilla European style cash-settled options on the Deribit BTC index with margin.
  • Trading BTC futures that settle on the Deribit BTC index, with up to 20x leverage.
  • Allowance for placing volatility orders, where the Deribit price engine continuously updates the price of the order as to keep the implied volatility of the order fixed. With this feature, basic market making is already possible for any trader opening an account on the platform.
  • Real-time risk management with incremental auto-liquidation: If an account has a maintenance margin higher than its equity, the Deribit risk engine will liquidate its position in small steps, providing maximal protection for all parties involved. Liquidations are small and instantaneous, again ensuring fairness for everyone.
  • A 100BTC insurance fund to cover bankruptcies. Any bankruptcy is published in real time on the platform. Deribit aims to completely avoid socialized losses. The platform’s risk management system is built such way that it is extremely difficult to go bankrupt even if one tries to do so.
  • Trading via REST, Websockets API or FIX bridge. High-performance API that can handle even hundreds of requests per second from a single account.

Deribit Faces Competition

Bitcoin-based futures trading is a novel service, with Deribit being one of the first platforms to provide such vehicles. However, Crix, another bitcoin exchange that provides futures trading, stands as competition to Deribit.

Crix uses math-based analysis to manage portfolio risk, claiming that it gives traders a better chance at larger profits. “Real mathematics stands behind many aspects of trading today,” Crix founder Dmitry Koval told Bitcoinist in July. “This includes the volatility modeling and the Value at Risk method we use at our platform.”

Competition aside, Deribit  said it provides trading services that cannot be found elsewhere, and is confident its zero-fee promotion will get more people to try out the platform

What do you think about bitcoin futures platforms? Have you ever traded bitcoin futures? Let us know in the comments below!  

Images courtesy of Deribit.

The post Deribit Removes Futures Trading Fees for year-End Promotion appeared first on Bitcoinist.net.

Deribit Removes Futures Trading Fees for year-End Promotion