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You Can Buy Crypto on Robinhood. But Should You?

You Can Buy Crypto on Robinhood. But Should You?
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To demonstrate investors’ growing interest in cryptocurrency, look no further than the financial apps already on your phone.

Digital payment giants PayPal, Venmo, and Cash — along with mobile stock trading platform Robinhood — are making it easier than ever to invest in cryptocurrency, with options to buy and trade coins within their apps.

But even if you feel more secure buying cryptocurrency through an app that you might already be using via a cryptocurrency exchange you’ve never heard of, the risks and volatility remain. Some of these major players are also more restricted in what they offer than traditional cryptocurrency exchanges.

Here’s what you need to know about buying cryptocurrency outside of cryptocurrency exchanges, and how to decide what works best for you.

Cryptocurrency popularization

Apps like PayPal and Venmo make accessible entry points for crypto beginners to dip their toes in the water. And depending on how you actually use the apps, their offerings may be a perfect fit for your knowledge base and interests.

For example, someone with no knowledge but a few dollars might find an exchange like Gemini confusing, but might be willing to buy some Bitcoin with their Venmo account just to experiment when they start learning.

Overall, experts say these apps can be great places to start if you decide it makes sense to invest in cryptocurrencies, but you don’t fully understand all the different types of crypto, how the exchange works, or the different storage options.

While using a traditional exchange may seem complicated, you can just log into your account and buy whatever you want without worrying about it, says Tyrone Ross, financial advisor and CEO of Onramp Invest, a crypto investment platform for financial advisors. “For starters, I really suggest going with the PayPal, Venmo, and Cash app types, because they make it as simple as possible.”

Even for investment professionals, cryptocurrency can be daunting. Personal finance expert Suss Orman recently told NextAdvisor about her first attempt. “Honestly, I didn’t really know how to buy so much bitcoin and crypto,” she says. “Coinbase used to bother me, I bought a few and then sold some, but it was way too complicated for me – even though it wasn’t complicated at all.”

Instead she decided to invest indirectly, through shares in companies that had holdings of cryptocurrency, but recently returned to buy cryptocurrency, this time on PayPal. “Now I own $5,000 in bitcoin, and I do it through PayPal because it was so easy to do,” she says.

How are these apps different from cryptocurrency exchanges

There are some important differences between using a fintech app to buy cryptocurrency against a traditional exchange like Kraken or, which largely include ways you can (or can’t) transact, and the restrictions on where you can hold the cryptocurrencies you buy.

Payment platforms and cryptocurrencies

PayPal, Venmo (which is owned by PayPal), and the Cash App all work a little differently when it comes to crypto. Each of these apps offers different coins and different fee schedules for buying and selling cryptocurrencies. While the Cash app allows you to transfer your coins from the platform or transfer Bitcoin that you keep elsewhere to your account, this is not an option on PayPal or Venmo.

Payments Application Encryption types Can you withdraw? Outlay?
PayPal Bitcoin, Ethereum, Litecoin, Bitcoin Cash number Yes
Venmo Bitcoin, Ethereum, Litecoin, Bitcoin Cash number Yes
cash app Bitcoin Yes Yes

Robinhood Crypto

Robinhood offers a few types of cryptocurrencies (such as Bitcoin, Ethereum, Bitcoin Cash, and even Dogecoin), which you can buy and sell within the app. Like other investment options, the big advantage of trading cryptocurrency over Robinhood is the lack of fees, which can vary widely between traditional exchanges.

Its accessibility as an investment platform is a huge attraction for many – whether they are investing in cryptocurrency or the stock market – but it’s also what could make Robinhood riskier. It has been criticized for making trading too game-like and encouraging volatility through active trading, rather than long-term investment growth. Just like stock trading, approaching an already speculative asset like cryptocurrency with this mindset can make your investment more than just a gamble.

When it comes to crypto specifically, Robinhood recently announced that it is creating its own digital wallet for crypto users. Previously in Robinhood, you could not transfer your private key (the crypto-token that gives access to your cryptocurrency) to your own wallet, or trade on an exchange like Coinbase. For believers in the crypto motto “Not your keys, not your coins,” this was a major flaw.

However, not many details about Robinhood’s wallet have been revealed, including fees, details about security, private and public keys, or any other features.

Whether you’re considering Robinhood or an app like Venmo, remember that the cryptocurrency is highly volatile. Even if you’re only putting in a few dollars to experiment, it’s smart to approach your investment with a long-term mindset – once you’re sure it won’t get in the way of your other financial goals – and be prepared to buy and hold over time rather than engaging in active trading.

Should you choose these over traditional exchanges?

Even the most popular cryptocurrency exchanges – like Coinbase and Gemini – may not be platforms you’ve heard of or trust with your financial information. Others are difficult to navigate, which makes the process of buying cryptocurrency even more complicated for the uninitiated.

As there are few federal regulations, it can be difficult to assess the security or popularity of a traditional cryptocurrency exchange. While apps like Venmo or PayPal can’t protect your crypto holdings under FDIC insurance as if it were your money, being familiar with these apps can make the experience a little simpler — you may already have your financial information linked, or the user interface is more known.

“The amount of transaction volume and transparency in their financial and trading operations I really think are the things you want to look at,” says Douglas Bonbarth, a financial advisor and president of Bone Fide Wealth in New York. “Will most people do that? No, they will find the easiest app to download and link their bank accounts, and make it easier to buy cryptocurrency again. This is kind of the appeal of mobile apps.” [like PayPal and Cash App] And the like.”

But many experts view the apps as a stepping stone, not necessarily somewhere they recommend holding your coins long-term.

“It would be a great way to introduce people to the crypto space,” says Spencer Montgomery, founder of Uinta Crypto Consulting, a program for new investors to learn about cryptocurrency. But as their participation increases, “I expect that many of them, as they see success in it, will want to know more, and as they learn more, they will realize that there are better ways to buy bitcoin and leave than that.”

At some point, you may decide that you want to control your keys and coins after all – which is why a traditional exchange might be a better option. For example, if your initial investment subsequently sees a significant increase in value, you may want to take your cryptocurrency offline for more security from cyber threats – something that wouldn’t be possible on Venmo or PayPal.

If all your cryptocurrency is on a platform that does not allow offline storage, your only option is to hold it and invest more money in another exchange – leaving your assets in multiple places – or sell what you have at the current price before buying elsewhere.

If you choose an exchange like Coinbase from the start, which offers the option to keep your coins on the platform or trade and store them yourself, it can be much easier to do these activities if you want to in the future.

It all comes back to the learning curve. “Exposure leads to expansion,” Ross says. “When you get into the space and learn more and get into the crypto economy, you will realize, oh wait, there are all these other things I can do.”

Whatever option you choose, just remember that cryptocurrency is still a highly speculative asset. It can be a worthwhile way to diversify your portfolio, even if you are just experimenting, but you should only invest what you are willing to lose.

Regardless of whether you’ve invested a few dollars in Bitcoin through Venmo, or are ready to buy from the exchange and keep your coin in an offline wallet, only do so after you have arranged your other financial priorities, such as an emergency fund and a traditional retirement plan.

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