Ever since Robinhood announced its ambitions for going full crypto last fall, it has been busy with building and implementation of these goals. It started building the crypto wallets so platform users could send and receive coins to and from outside wallets. Surprisingly, it didn't take too long for them figure things out and they deployed real crypto wallets just a couple of weeks ago. To find out more about release of crypto wallets feel free to read Finally Robinhood Crypto Wallets Are Here! It doesn't seem like they are going to slow down anytime soon.
A week ago they have added new coins to the crypto trading, which also means crypto wallets for these tokens as well. The new tokens they have added are Polygon, Shuba Inu, Solana, and Compound. I haven't heard about Compound before. If you know what it is about, let me know in the comments. I am sure there are many who like coins Matic, Shib and Sol. Before adding these coins Robinhood crypto only had Bitcoin, Bitcoin Cash, Litecoin, Ethereum, and Doge available for trading. Adding new coins to the platform wasn't the only one.
Robinhood is also acquiring UK-based crypto firm Ziglu. While this acquisition is not finalized yet, and may need to go through review and approval process by regulators and/or government agencies, this does demonstrate Robinhood has bigger plans for their involvement in crypto. Both companies have signed the agreement, future will tell if this acquisition will go through. What is clear from Robinhood's announcement post is that they are eager to expand internationally, and acquisition of Ziglu may just be the beginning.
What really caught my attention is how they are trying to return to their their original vision, at least they are using it as a marketing strategy. Their new motto or mission is to democratize finance. When before when they started they used a similar motto that represented a mission to democratize trading. They indeed came up with a new vision back then, and set themselves very ambitious goal of building a trading platform with zero commissions. Everybody doubted this mission, many especially on Wall Street anticipated these efforts to fail miserably. Nobody in legacy trading platforms and brokerages believe zero commissions were possible in trading. They all end up being wrong. Robinhood not only was able to pull it off, but also made other follow the suit.
Other brokerages like TDAmeritrade, Etrade, and many more decided to implement zero commission model as well. Not everything was positive in Robinhood's journey. Initially Robinhood explained how they would be able to achieve zero commission model, and it was by earning interest on idle funds on the platform. It didn't fully make sense, but that was some explanation people could accept and see how it would work out. Years later we found out the real way Robinhood made money despite zero commissions was they were selling order flows. They were penalized for not disclosing this before. I am not sure if they are still engaged in the same practice. Even if they do, it doesn't really bother me, because when I read some research and experimented wit prices I didn't really see any big disadvantages caused by selling order flows.
The darkest moment in Robinhood's journey and their biggest blunder was freezing trades of some stocks that were part of the WallStreetBets movement and even Doge coin. That did indeed ruin their reputation. Some believe these actions were criminal. We shouldn't forget that other platforms also did the same things. Among them were WeBull, TastyTrades, etc. It even seemed like an organized effort. Which at time made me think this was done by clearing houses who have higher authority over brokerages. This theory was invalidated when Vlad Tenev, the CEO and co-founder of Robinhood took responsibility for the decisions and said it was his decision to freeze trades. However, it still wasn't clear if it was solely his decision, or he was just saying it to keep his business relationships with the powers that be.
Legacy trading and financial systems have many examples of corrupt actions, deals behind the scenes, and building rigged systems that put small groups with money and power to more advantageous positions compared to the retail traders. I have personally felt that when I had big losses trading stocks, and at the end it became so obvious that some had access to inside information before the public. That's a story for another time, or if you are interested read my post on trading Cobalt International. We don't even need to go through the history to see how corrupt these systems are.
Just a month or two ago London Metal Exchange did something even worse than what Robinhood has done. This is a story similar to WallStreetBets GameStop short squeeze. Similarly, Nickel was going through a short squeeze and its prices were going crazy high and were going to bankrupt big players who had been shorting Nickel. London Metal Exchange, not only freezes the trades after the fact, but also reverses all the trades. To find out later one of the bigger short positions were made by the Nickel producer. I don't know how they can get away with such actions. But apparently they do this kind of stuff all the time.
For this reason, I may give Robinhood a benefit of a doubt and see their actions as bad navigations through the muddy waters of broken financial and trading systems. Regardless the reasons, I am not trying to justify what Robinhood has done. I am very skeptical of what they may do in the future. Even though they have real crypto wallets, I doubt I will have full trust in them for a while. Everybody should do their research and protect their live-saving when dealing with any of these companies, and make educated decisions. I also believe in second chances, and I personally am willing to give Robinhood another try.
The reason for this is very simple. They had a great idea which produced real results. By returning to their original idea that made them successful and this time implement it in crypto space has a potential of changing how trading crypto is done as well. Better way for trading crypto may be the decentralized platforms. Unfortunately, many just borrow the words decentralized and create misleading platforms with using new buzz words like defi. We have seen quite a few scams, rugpulls, and dishonest behavior in this place. Truly decentralized trading platform will emerge. They may already exist. But these things are not so easy to understand for ordinary people and many go to a familiar models like centralized exchanges.
Centralized exchanges and trading platform will continue to exist for a while, I believe. I don't see companies like Coinbase, Binance, Bittrex, and other going anywhere anytime soon. That's why Robinhood will have its place among these as well. I don't know a single exchange that has a pristine reputation. I dislike Coinbase, not fond of Bittrex, and Binance is corrupt. We can find dark moments and moves any of the major exchanges have done against the benefit of their users. Robinhood emerging as another big player in this crypto space with an idea of utilizing zero commission model in trading cryptos, may create a healthy competition and make other exchanges reevaluate their business models as well. This alone is worth watching how Robinhood's strategy will play out. They have done it once, they may just do it again.
The question is what took them this long? Robinhood Crypto has been around for few years now. But they never had goals of going all in crypto, providing full crypto wallets, aggressively add new coins, expand to international markets. These are all new for Robinhood. They could have started this strategy a couple of years ago. Maybe they didn't have enough knowledge, skills, and resources for that. Or maybe ruined reputation helped them re-discover themselves and their true mission again. Is it just a marketing strategy or a genuine ambitions to democratize finance? I would like to hope the latter is true. Time will tell, until they best to remain cautiously optimistic.
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