Robinhood Crypto Wallet Launch: Expert Reveals What Investors Need To Know

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Robinhood is launching crypto wallets to 1,000 users as beta testers with a more widespread rollout expected in the coming months. But what does this mean for Robinhood users and are other brokers lagging behind?

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Q4 2021 hedge fund letters, conferences and more

GrizzlyRock Value Partners was up 34.54% net for 2021. The fund marked 10 years since its inception with a 198% net return, resulting in an annual return of 11.5%. GrizzlyRock enjoyed 14.8% long alpha against the S&P 500 and 26.9% against the Russell 2000. Q4 2021 hedge fund letters, conferences and more The fund's short Read More

• 1. The Launch Of Robinhood's Crypto Wallet
• 2. Most Brokers Don't Provide Crypto Wallets
• 3. Customers Could Have Better Control Of Their Cryptos
• 4. Another Step To Become An Integrated App For Financial Services
• 5. Race For Customers Can Become More Fierce Between Brokers And Crypto Exchanges
• 6. This Service Can Boost Account Openings At Robinhood

Adam Nasli, Head Analyst at international broker comparison site BrokerChooser shared his thoughts on Robinhood's rollout of its crypto wallet:

“When you buy spot cryptos, it's an important safety and usability aspect of how you store your private keys. Private keys give access to your cryptos on the blockchain , it's similar to a password to your bank account. The private keys are held in crypto wallets , which can be an online app or an offline device.

Providing a crypto wallet is a service that is really important when spot cryptos are available. At crypto exchanges, like Coinbase or Kraken, this service is almost standard. However, most brokers don't provide it because either spot crypto trading is not available on their platforms (only other forms, like crypto derivatives or ETN/ETPs) or they simply haven't developed it yet.

Robinhood started rolling out crypto wallets in beta form for some of its customers. There are some factors we analyzed why this service improvement can be important for Robinhood and US retail investors:

We analyzed and compared over 100 brokers from all around the world. Roughly 60% of the brokers we covered provide crypto in some form, such as spot crypto or crypto derivatives. However, only 5% of the brokers provide crypto wallets and they're mostly non-US brokers.

Even some of the basic services are impossible without a crypto wallet, such as transferring or receiving cryptos. Customers can now decide whether they want to hold their cryptos on Robinhood's custodial crypto wallet or the customers' own, so-called non-custodial crypto wallet.

Robinhood offers a wide range of financial services, including stock/ETF /options/crypto trading and cash management products. Providing a crypto wallet is another step to become one single app for all kinds of financial services.

Not only did Robinhood start to provide services that are standard at crypto exchanges, crypto exchanges also plan to provide services which are considered standard at brokers, such as stock and ETF trading. At the moment, Robinhood gives access to only a few crypto coins compared to the hundreds of coins available at most crypto exchanges. However, more product development in the crypto area, including this crypto wallet launch, can intensify the competition between crypto exchanges and brokers.

Based on our analysis , the account openings dropped 73% on average in Q3 2021 compared to the peak of Q1 2021 and one of the biggest drops was at Robinhood with 88% fewer account openings. As crypto wallets are really important for customers and most US brokers don't provide it, this move can have positive impacts on account openings at Robinhood.

Updated on Jan 25, 2022, 12:08 pm

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