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Robinhood's actions like freezing trades for GameStop stock in the beginning of this year have damaged its reputation and many started questioning its original vision and goal of democratizing trading. I think Robinhood could repair its reputation by taking measures that wouldn't force them to freeze trades, but most importantly by going back to their original vision and innovating to democratize trading further.
They were the pioneers when they came up with zero fees trading. This made many other trading platforms go to zero fees as well. It was a successful endeavor.
Robinhood also became a crypto trading platform about three years ago. However, they have a very limited list of crypto assets available to trade. One of the main issues and concerns for their crypto trading platform has always been the inability of the users to send or receive their crypto assets to and from external wallets.
A month ago Robinhood announced their ambitions to start implementing crypto wallets on the platforms so that users could send and receive their coins from other wallets. They sent out emails to their users about this with an option to join the waitlist.
Today, they revealed that one million users have joined the waitlist. While this shows the interest and demand to have the actual wallets on Robinhood, it also demonstrates that Robinhood is serious in making this happen. For those who understand crypto assets, use them, trade them, it is a no brainer. They should have done this a long time ago. Perhaps they didn't have technical resources, or there were legal obstacles in the past. But if they can pull it off now, not only they can repair their reputation, but also transform themselves as a company of the future.
Robinhood is a publicly traded company. They went public just recently, at the end of July of this year. Similar company in the space is Coinbase, which also went public this year. The reason I mention Coinbase is, what Robinhood is trying to do may create a huge competition to Coinbase that will make them rethink their business model.
Just like stocks and options are traded with zero fees on Robinhood, crypto is also traded for zero fees. In fact, that's how they advertise themselves by comparing fees with other exchanges like Coinbase. This wasn't much of competition for Coinbase before, because Robinhood didn't have actual wallets that users could send and receive coins from external wallets. Adding this feature will be great for Robinhood in three ways and help them significantly increase their user base.
First, people in crypto space will take them more seriously. More users will join knowing that they can have full control over their assets purchased on Robinhood.
Second, Technical knowledge, skills and infrastructure they will build to support wallets will enable them to add many more crypto assets to their trading list. This will also attract more crypto enthusiasts.
Third, and perhaps the most important one is taking business away from their competitors if they can maintain zero fee trading. For example, if I had some crypto assets in some wallet and wanted to sell them one of the options would be to send them to Coinbase and sell them for % fee. Now if the same thing can be done using Robinhood with zero fees, I probably would choose Robinhood for this transaction.
This is a big if, because it is a big challenge. But if they can indeed have full feature wallets and maintain zero fees that will be a game changer in the crypto trading space. I understand, DeFi alternatives may be better and more interesting for many. The fact of the matter is there are a significant amount of people who still use and rely on centralized platforms for trading crypto. This will continue for a while. Defi platforms require learning new things, while CeFi can be an easier path for onboarding those who are new to the crypto world.
I believe there is a huge potential for Robinhood in crypto space. Especially since they operate securities part of the business and crypto business as separate entities. As they get better in crypto technologies, keep their original vision, and prove loyalty to their users, they may continue being a successful company.
Considering all this, would Robinhood stock $HOOD be a good investment or a position trade opportunity? Currently, $HOOD is trading around $41 and has a market cap of $36 billion. In comparison, Coinbase stock $COIN is trading at around $300 and has a market cap of $63 billion.
What do you think? Is Robinhood getting ready for a big play in crypto? Let me know in the comments.