Robinhood, a brokerage and cryptocurrency exchange platform, has added support for customers to buy and sell Litecoin [LTC] and Bitcoin Cash [BCH] with $0 commission. Robinhood initially allowed trading only in Bitcoin [BTC] and Ethereum [ETH], with Litecoin and Bitcoin Cash being its two new additions.
Charlie Lee, the creator of Litecoin, tweeted about this development. He said:
Currently operating in 17 U.S. states, Robinhood aims to make the financial markets accessible to everyone in hope of creating a new generation of investors. While stock brokerages charge up to $10 per trade, Robinhood manages to run commission-free trades. The article on their website reads:
“By cutting out the fat- hundreds of storefront locations, manual account management, expensive Super Bowl ads, etc.- we are able to maintain a lean bottom-line and pass the savings along to you, the customer.”
Vlad Tenev, the CEO of Robinhood, believes that people that are used to the traditional ways of transaction fee-based trading will eventually understand that the consumers are not really benefiting from the transaction fees. The company makes profits primarily by collecting the interest on cash and securities held in customers’ accounts. Robinhood Gold, a platform for optional premium account memberships, is another means of profit.
While there are no indications as to how they plan to maximize profits in the long term, Robinhood’s primary focus at the moment is to get as many consumers as possible to open accounts, benefiting its core business. Tenev, at a conference in New York, stated:
“The primary goal of the crypto business is to just get people into the overall ecosystem so we’re intending to break even on that business for the foreseeable future. We had over 1 million people joining the waitlist in the first couple of days.”
Earlier in January, Robinhood was unable to sustain customer orders as several exchanges were down for many days in a row. Some other features of Robinhood include Real-time Market Data which “serves stream market data from exchanges in real-time”, and Smart Notifications which notifies users in advance of the scheduled events such as earnings, dividends, or splits.
According to Tenev, Robinhood considers any consumer-oriented company that allows people to trade or even just buy cryptocurrencies as it’s competition. Baiju Bhatt, the co-CEO of Robinhood said in an interview with Fortune that they aim to become one of the largest cryptocurrency platforms in the world. They previously raised $363 million in a funding round earlier this year, which will reportedly be used to expand its cryptocurrency trading services beyond just the countries they are in right now.
Robinhood currently has over 5 million consumers and is valued at $1.3 billion. It participated in an all-out price war among online brokers where leading companies like Fidelity and Schwab had to cut trading fees by nearly 40%. Platforms such as this may find Robinhood a threat.
Coinbase, presently, charges between 1.5% to 4%. The rate is determined by the payment method used by the user, their location, and other such factors. Coinbase too deals with four cryptocurrencies as of yet but operates in around 50 states. Its user base is north of 20 million, which is four times that of Robinhood.
Another competitor, Square Cash App, a payments app launched in late January by Square, offers only Bitcoin purchases and operates in 47 states. While Square takes a spread on the exchange rate depending on the size of the transaction and market volatility, Square Cash also does not charge a fee for their services.
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Fall in Bitcoin’s market dominance may be correlated to the fortunes of the altcoin market
The trends set by virtual assets have always highlighted the cryptocurrency market’s inherent volatility and spontaneity. Prices lack symmetry and rarely exhibit consistent growth as different factors come into play to dictate an asset’s valuation.
At press time, the world’s largest crypto, Bitcoin, had stormed past the $11,000 mark and was consolidating to push for a surge over $12,000. The rest of the altcoin market however, apart from one or two minor hikes here and there, has been relatively quiet after collectively surging in the early part of the year.
At the beginning of 2019, a significant number of crypto-assets performed significantly well in a group, wherein most assets demonstrated a prominent hike in their values with little to minor price corrections.
A majority of tokens doubled their valuation until Bitcoin breached the $6,600 resistance. Subsequently, altcoins failed to keep pace as Bitcoin continued to test more resistance limits in the market.
At present time, Bitcoin enjoyed an unprecedented 62 percent dominance in the cryptocurrency market. As its dominance primes itself to climb over the 63 percent mark, many in the community speculate this could be red flags for the altcoin market.
Major cryptocurrency enthusiasts and analysts have stated that altcoins could significantly capitulate if it so happens. However, past events offer a sliver of hope for the altcoin market.
According to CoinMarketCap, the altcoin market has been significantly affected whenever BTC’s dominance has fallen. During the bull run of 2017, Bitcoin enjoyed a dominance of 65 percent and the global market cap hit a value of $402 billion. However, in January 2018, when BTC dominance plummeted, the global market cap peaked at around $710 billion. The dominance was down by half, whereas the global market cap had almost doubled.
A major reason for the same was money funneling into other altcoins after witnessing a shift in momentum from Bitcoin to the rest of the crypto-market. The present market situation may take a similar path once BTC’s dominance falls, opening the door for other virtual assets to take advantage of the scenario.
However, the present rise of BTC is backed by much more certainty than the bull run of 2017. Hence, a repeat of the January 2018 period may be unlikely, and will happen if and only the market sentiment shifts gears drastically towards altcoins.
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