Home Blockchain Stop Buying Bitcoin with Robinhood! | by Henry Gruett | Making of a Millionaire

Stop Buying Bitcoin with Robinhood! | by Henry Gruett | Making of a Millionaire

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Sat, 05 Mar 2022 13:27:51 +0000harvestmoonfriends

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Whereas this text accommodates affiliate hyperlinks, all the things said on this article is my real opinion.

With Bitcoin’s current bull run and all of the accompanying hype round it, many traders are trying into shopping for Bitcoin or Etherium. However many discover the ideas and know-how backing Bitcoin to be fairly complicated. Tales of Bitcoin hacks and no FDIC insurance coverage scares away many potential traders who don’t have time to fret over their cash at this degree. Is the potential development well worth the potential danger of shedding all the things to an web scammer?

Enter Robinhood.

Since its conception in 2013, the younger inventory brokerage has risen in recognition for its simple-to-use app and 0 buying and selling commissions. And in 2018, Robinhood added the flexibility to commerce a couple of of the highest cryptocurrencies.

Picture from Robinhood

At first, look, utilizing Robinhood to spend money on crypto appears wonderful. No buying and selling charges, an app with a clear interface and credibility, plus no worries of all of the scammer stuff. Simply purchase in and sit again. Proper?

If it’s too good to be true, it’s. And that applies to Robinhood.

No, Robinhood isn’t making an attempt to rip-off individuals and steal your cash. All the things in regards to the no charges and no scammers is true. However Robinhood is lacking a couple of key components that prohibit it from being a service I like to recommend (for crypto, at the very least).

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There are over 5,000 cryptocurrencies and extra being created daily. These different cash are normally known as altcoins. And whereas most of them are experiments that may fall and go nowhere, there are some altcoins which can be rising and are going to alter the world. Tasks like Cardano are rising quick and present a promising future. However you gained’t be buying and selling Cardano as in Robinhood anytime quickly.

Robinhood presently solely helps buying and selling for seven cryptocurrencies. And whereas that’s extra decisions than related providers like Webull, it’s a handpicked set of seven. A kind of is Dogecoin, a joke taken means too far. When in comparison with the 150+ choices supplied by providers like Binance, Robinhood appears to be like fairly weak. Think about Robinhood solely supplied seven shares to select from.

However let’s say you’re comfortable with simply the seven choices. You in all probability solely plan on investing in Bitcoin and perhaps Ethrium when you’ve got time. Even in that case, I don’t advocate you employ Robinhood.

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The commonest false impression with cryptocurrencies is that they’re like shopping for a inventory. When you can spend money on cryptocurrencies, that you must perceive that cryptocurrencies are cash.

Cryptocurrencies are simply as a lot a forex because the US greenback or British pound. They can be utilized to purchase and promote gadgets and may have their performance grown with options like sensible contracts. All the things from insurance coverage to voting might be constructed on high of blockchain know-how. Shopping for crypto isn’t nearly proudly owning it. It’s about utilizing it.

This tweet from Changpeng Zhao, CEO of Binance, says it fairly effectively:

With Robinhood, you don’t actually purchase any crypto. You’re actually simply shopping for IOU’s that monitor the worth of that cryptocurrency. That’s how Robinhood is ready to do zero fee crypto buying and selling. They’re not actual. And if you happen to don’t actually personal any cryptocurrency, you possibly can’t withdraw it. There’s a easy saying within the crypto communities that explains this completely:

Not your keys, not your cash

The keys are referring to the keys to your pockets. With providers like Robinhood, you don’t have entry to your precise crypto pockets. Meaning you possibly can’t withdraw your cash as cryptocurrency and put it to make use of. It’s simply caught until you liquidate it again to conventional forex.

In distinction, if you happen to maintain the keys to the pockets, you possibly can transfer the cash into what’s referred to as a chilly pockets. This mainly means you’re taking your crypto off the web and out of the prying fingers of scammers and hackers. We’re not going to leap into the small print of chilly wallets versus sizzling wallets as a result of that’s not what this text’s about.

The primary take away is that when you’ve got the keys to your pockets and may switch your crypto to different wallets, you maintain the ability over your cash. And what are you able to do with that energy? Many issues, together with rising it…

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Replace: I wrote a complete article on easy methods to develop curiosity along with your Bitcoin. You’ll be able to test it out right here:

Now that we perceive that cryptocurrencies are a type of cash, not an asset like a inventory, we are able to find out about how one can earn curiosity along with your crypto.

Some cryptocurrencies like Cardano supply what’s referred to as staking. With out diving too deep, staking means that you’re delegating your cash to earn rewards. Every cryptocurrency’s staking system is totally different, so there’s nobody definition or methodology. And never all cryptocurrencies supply staking. However you possibly can nonetheless earn curiosity on them.

Nonetheless, staking isn’t an possibility for all conditions. That’s the place curiosity is available in. Providers like Blockfi and Celcius supply the flexibility to earn curiosity off of your cryptocurrencies you retailer with them. We’re speaking 4% – 8% or extra relying on what forex. Blockfi’s rate of interest on the US greenback is 8.6%. That makes the 0.5% curiosity from my financial institution seem like trash.

Shopping for cryptocurrencies by means of a service like Robinhood has your crypto locked up and holds you from with the ability to do something with it. Why wouldn’t you set your crypto to work whilst you maintain it?

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