This is the start of the "Race to the Bottom"!
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
I just learnt about robin hood yesterday, this is the second time now hearing about it. I think I'll research it now lol sounds legit
You are correct in that this is huge news! It seems like if they are charging for the coins to stay on the exchange this is good in that hopefully people will get them off of the exchange and into safer places!
If free trading becomes the norm, this will certainly bring on some of the stock brokers who can't fathom the total amount being more than that.
I would imagine that the majority of cryptocurrency users/investors are under the age of 40!
Most people with 20K in the market aren't using Coinbase. GDAX is also run by the makers of Coinbase and has much better capabilities, including bid/ask as well as better rates on trades.
I think Coinbase is great for newbie investors who want to throw less than 1000 dollars into the market and see what happens. I feel like most serious investors with a bigger stake are already trading on other exchanges.
More competition for services to appeal to newbie investors, and more people entering the market is definitely good for the crypto space, and I look forward to seeing what Robinhood brings to the table.
I actually know of quite a few people with more than $20k in crypto that are using coinbase... just off the top of my head.
And that $20k was just used an example. That same point applies whether it was in reference to $20k, $10k, or $1k.
I find that bizarre. Why would you knowingly lose $800 on transaction fees when there's an easily accessible (linked) platform available where you can avoid it? Is the convenience of Coinbase really worth that fee?
A guarantee on your stored USD, easy fiat transfer for US customers, a platform that is not completely dependent on Tether not imploding, there are many reasons people use Coinbase. It's not perfect, but at least you have less of a chance of getting Bitfinexed.
That doesn't really answer it. Coinbase and GDAX are both owned by Coinbase, so they offer more or less the same guarantees and same security.
GDAX is significantly cheaper in terms of fees and much better in terms of features. The only place where it loses to Coinbase is in user friendliness. Why would anyone with the slightest technical knowledge pay an extra 1.25%-3.75% in fees in order to use Coinbase over GDAX?
There's your answer right there!
Good info. I will look into this as I invest more so I can understand how profits can be made with more advanced platforms.
Can only be a good thing for us the consumer.
My thoughts exactly :)
The door to Mass adoption
As true as this seem, it isn't a good basis to rate anything crypto at the moment because, once something is about money, everybody rushes it. Not just millennials. We might say millennials are the early adopters but from signals I have seen in my home country
Nigeria, a lot of people are coming into crypto big time and they can not be grouped into any category. Even illiterate are coming in, I mean people with no formal education.Furthermore,in my country, millennials are heavily disadvantaged in terms of funds, older people seem to have more money to enter into it and they are coming in fast.
As true as this is, their limited customer-base is a little worrisome. Crypto is all about decentralization meaning there are no boundaries , so when a crypto-enterprise starts with limitations and boundaries, it's a bad basis. it makes it look like a bank- the exact opposite of what a crypto-trading platform should be.
You are so right with this, but I assure you, fee-less trading is going to be the order of the day soon because decentralization as a philosophy is not in support of having to pay to send money. It makes it look like a bank and the
hiddenmotive of the decentralization/blockchain community is to make banks archaic. So, if a trading platform wants to survive on the long term, it should look at how they can achieve profitability without having to charge traeing fees, same for crypto-technologies like the blockchain and it's sister-technologies.Thanks for the info @jrcornel
Right on man!
Is fee-less trading even possible?
In order to run a transaction, most cryptocurrencies require a mining fee to be paid. I certainly think we can expect significantly lower fees, but fee-less might be a bit of a stretch - At least with BitCoin, Ethereum, and the other main cryptos that are currently in existence. They rely on mining fees as incentive for the miners to operate the network. Without that, how will the network run?
They stated that they "hope to break even" on the initiative, so perhaps their charged premium service plus the interest they may charge on tokens held on their exchange might be enough to cover those mining fees.
Well, I understand you perfectly. But then was it really possible 5 years for an individual to print his / her money and give it out to people and yet his money never depletes. No, that is impossible. But then, is that not what the steem blockchain is all about.
I am all for the future. Now, money can be printed via crypto, the next stage is how to send that money without having to pay. One more time, that is what the steem blockchain has achieved by giving incentives to the miners in a different way.
When it comes to innovation, you don't look at
what is, you look atwhat should be.For instance, Facebook serves us ad but in the real sense, some of these ads are suggestions that we need, they get paid for that and we get value for that but guess what, the advertisers pay for the value we get because it is a joint value.
Nothing is impossible! Nothing! before satochi did this whole thing, zero double spending was a myth. right?
I would have to agree with most of this post . Anytime more buyers are introduced it is a good thing . However in response to the issue with coinbase being expensive I would disagree only because coinbase and gdax should be close to the same thing in anyone's mind who would care to know especially anyone planning on spending 20k. Let's face it trading on the gdax is essentially free and is as simple as can be. Not to mention the ability to switch back and forth with coinbase instantly . Add to that one can load cash directly to ones gdax account for nothing. Oh and let's not forget that when withdrawing , one can withdraw to any account for free, not just a coinbase account. This last feature makes it possible to exchange Bitcoin litecoin or ethereum with anyone with no fees from miners.
It will be great if Robinhood is really go for fee-free trading. Coinbase charges at a rate 1.49% which the more you trade, the more they earn. Some other exchanges charge the transaction fee even higher.
Few days ago I sat down with a friend and we spoke about the future of cryptocurrency and most of what you wrote here were the exact words I told him. After reading this I felt connected to your thought. This is a power post for the future.
Very informative post. Trading fee will come down for sure.
It is interesting. Also a nice post. Lets see what what happen.