Robinhood has IPO’d recently, raising close to $2 billion. This is quite a low figure from the $32 billion that the company was valued at before it went public. Robinhood had surged to popularity during the 2020 pandemic when meme stocks had blown up on social media. The app which offered seamless stocks and crypto trading saw an increase in the number of users. Following the popularity of meme stocks like GameStop and AMC. Also, the rise of meme coins like Dogecoin saw more users sign up for the app.
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.
Why You Should Move Your Crypto Out Robinhood
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. They belong to Robinhood. Investors are not directly buying cryptocurrencies when they purchase them on the trading app. You are simply betting on the price of the coin.
Related Reading | Crypto Market Breathes Sigh Of Relief, Bitcoin Rises From “Extreme Fear”
This means investors are simply putting their money on the line. 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.
Buying cryptocurrencies on Robinhood also 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.
Total crypto market cap currently sits above $1.5 trillion | Source: Crypto Total Market Cap on TradingView.com
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 the investing community believed this was because people had found a way to help “the little guy” make money off the market.
Related Reading | Robinhood Adds 9.5 Million New Crypto Users As Mainstream Adoption Continues
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.
Related Reading | Dogecoin Rally Allows Robinhood To Steal Top Spot On App Store
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.
Credit goes to Reddit user r/wildabroad for an insightful short post on the r/CryptoCurrency subreddit. Drawing attention to something that a lot of crypto investors are not aware of.
Featured image from Kindpng, chart from TradingView.com
by Best Owie via Bitcoinist.com
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