Navigating the world of cryptocurrency purchases can be confusing, especially with the evolving regulatory landscape. Many investors seek accessible and cost-effective platforms to manage their digital assets. Robinhood, primarily known for stock trading, also offers a straightforward solution for cryptocurrency transactions. This guide provides a clear, step-by-step walkthrough on how to buy and sell crypto using Robinhood, along with essential tips to optimize your experience.
Understanding Robinhood's Crypto Services
Robinhood is a U.S.-registered broker-dealer that gained widespread recognition during the 2021 GameStop trading phenomenon. Unlike traditional brokers, it integrates cryptocurrency trading alongside stocks and other investment options. As a broker, Robinhood acts as an intermediary, facilitating transactions between buyers and sellers. The platform supports several major cryptocurrencies, allowing users to manage diverse investments within a single, user-friendly application.
Key Features of Robinhood Crypto
- Unified Platform: Trade cryptocurrencies, stocks, and other assets in one place.
- User-Friendly Interface: Designed for simplicity, catering to both beginners and experienced traders.
- Integrated Wallet Options: Offers both custodial holdings and a separate non-custodial wallet app for advanced users.
Step-by-Step Guide to Buying Crypto on Robinhood
Purchasing cryptocurrency on Robinhood is a streamlined process. Follow these steps to get started:
- Create and Fund Your Account: Begin by signing up for a Robinhood account. You'll need to complete identity verification (KYC) as part of the setup. Once verified, link your bank account to deposit funds.
- Navigate to the Crypto Section: Open the Robinhood app. Use the search bar to find a specific cryptocurrency or go directly to the dedicated cryptocurrency page to browse available options.
- Select Your Cryptocurrency: Choose the digital asset you wish to purchase and tap the "Buy" button.
- Enter Purchase Details: Specify the amount you want to buy, either in dollar terms or units of the crypto asset. Review the order details carefully.
- Submit Your Order: Confirm the transaction by swiping up to submit. You will receive an order confirmation shortly after.
Note: Order settlement may take a brief period. Ensure you have sufficient funds in your account to avoid delays.
How to Sell Cryptocurrency on Robinhood
Selling your crypto holdings on Robinhood is just as straightforward:
- Choose the Asset to Sell: From your portfolio, select the cryptocurrency you want to sell.
- Initiate the Sale: Tap the "Sell" button and enter the amount you wish to sell.
- Review the Transaction: Check all details on the review screen, including the estimated proceeds.
- Confirm the Sale: Swipe up to submit your sell order. An order confirmation will be provided.
Proceeds from sales are instantly available within your Robinhood account for further investments or can be withdrawn to your linked bank account.
Essential Tips for Trading Crypto on Robinhood
To make the most of Robinhood's crypto services, keep these strategic points in mind.
Understanding Fees and Costs
A significant advantage of using Robinhood is its fee structure. The platform charges zero commissions for buying and selling cryptocurrencies. However, network fees (also called gas or miner fees) apply when transferring crypto to external wallets. These fees are determined by the blockchain network, not Robinhood, and are displayed before you confirm any transfer transaction.
👉 Compare fee structures across platforms
Robinhood Fees vs. Competitors
| Platform | Buy Fees | Sell Fees |
|---|---|---|
| Robinhood | $0 | $0 |
| eToro | 1% | 1% |
| Coinbase | $0.99 - $4.19 | $0.99 - $4.19 |
| Kraken | 0.16% - 0.26% | 0.16% - 0.26% |
Wallet and Transfer Options
Robinhood allows crypto transfers to external wallets in most U.S. states, with some restrictions. Users can send up to $5,000 worth of crypto or execute up to 10 transfers per 24-hour period. The platform also offers the Robinhood Wallet, a separate non-custodial app that provides full control over private keys and allows interaction with decentralized applications (DApps) on networks like Ethereum and Polygon.
Important: Crypto assets in the non-custodial wallet are not protected by FDIC insurance or SIPC safeguards.
Security and Account Verification
Robinhood employs robust security measures, including storing the majority of digital assets in cold storage. To enable crypto transfers, users must complete full identity verification, which includes submitting a government-issued ID and a live photo, and enabling two-factor authentication (2FA). This process can take up to five business days to complete.
Tax Reporting and Transaction History
Crypto transactions are taxable events. Robinhood provides Form 1099-B to users whose gross proceeds from crypto sales or rewards meet or exceed $600 in a tax year. The form reports proceeds to the IRS. Cost-basis information is provided for assets purchased on Robinhood. For crypto transferred from other platforms, users are responsible for tracking and reporting their own cost basis.
Keeping Your Investment Options Open
While Robinhood offers a convenient and low-cost entry point into crypto, savvy investors often diversify their platforms. Using multiple services can provide access to a wider range of assets and mitigate platform-specific risks. Robinhood excels in simplicity and cost-effectiveness, making it an excellent choice for those prioritizing ease of use and low fees.
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Frequently Asked Questions
Can I buy cryptocurrency on Robinhood?
Yes, Robinhood supports the buying and selling of multiple cryptocurrencies directly within its app. Availability may vary based on your state of residence due to local regulations.
What is the minimum purchase for Dogecoin on Robinhood?
Unlike other cryptocurrencies where you can buy fractional amounts, Dogecoin (DOGE) must be purchased in whole units. The minimum order is 1 DOGE.
Are there any hidden fees for buying crypto?
Robinhood charges zero commissions for crypto trades. The only fees you will encounter are network fees when transferring crypto out of Robinhood to an external wallet, which are paid to the blockchain network, not to Robinhood.
How long do withdrawals to my bank account take?
While proceeds from crypto sales are instantly available in your Robinhood account, withdrawing cash to your linked bank account via ACH transfer typically takes 3 to 5 business days to settle.
Is my cryptocurrency insured on Robinhood?
Cryptocurrencies held in your Robinhood investing account are not FDIC-insured or SIPC-protected. For enhanced security, consider transferring major holdings to a self-custody wallet where you control the private keys.
How does Robinhood compare to dedicated crypto exchanges?
Robinhood offers simplicity and integrated traditional investing, often with lower fees. Dedicated crypto exchanges typically list a much wider selection of altcoins and offer more advanced trading features like staking and borrowing. The best choice depends on your specific investment goals and need for advanced functionality.