Aside from politics, I’ve gotten increasingly interested in cryptocurrency of late. In January of this year, I finally took the plunge and invested a small portion of my retirement portfolio in a variety of cryptocurrencies, including Bitcoin, Ethereum, and Dogecoin. A friend recently asked me for what platform I used to buy and sell crypto, and why. I told him: Robinhood. And figured it might make an interesting column explaining why.

So, why Robinhood? My nephew had been pushing me for the past year to invest in Bitcoin. He assured me that it’s $10,000-a-coin price was a steal. It turns out he was right, for now. So at the end of January of this year, I decided to dip my toe in crypto. Let me talk a bit about why I chose Robinhood as my trading platform.

Let me start out by saying that I am not a professional financial adviser. I’m just a guy who writes about politics, and who simply wants to share his experience using the Robinhood trading app, and a few others. If you find my experience useful, great. If not, that’s cool too.

    Cryptocurrency Security

Last year, at the urging of my nephew, I started exploring how one trades cryptocurrency, and it was confusing as hell. In addition to finding a platform on which you can buy and sell the various currencies — and each platform seems to have different currencies it includes (e.g., some let you buy and sell Dogecoin, others don’t) — there was also the larger question of security. Cryptocurrencies don’t have the federal financial protections that stocks have. And in the past few years, there have been some famous raids on cryptocurrency trading platforms by people who broke in and stole other people’s crypto. So my nephew urged me to read up on cryptocurrency security, and specifically “hot and cold wallets,” which are places you can (hopefully) safely store your own cryptocurrency.

You can read a bit about the wallets here, and after you do, you may understand why I chose Robinhood instead. For me at least, the entire subject was just too complicated and confusing. At Robinhood, they say they hold most of your crypto investments in cold wallets, meaning a place not connected to the Internet (so it should be harder for someone to break into). I liked that Robinhood was using a cold wallet for most of the holdings — and that they also have insurance — but just as importantly, that Robinhood itself was responsible for handling the cold wallet. The last thing I wanted was to keep my own cold wallet laying around my apartment to be lost, stolen, or burned in a fire. For me at least, it’s easier to let Robinhood sweat the details.

    Robinhood’s Ease of Use

Overall, I find the Robinhood platform easy to use. It was easy to sign up, easy to buy and sell cyrpto and stocks, and easy to keep track of my investments using the app. Robinhood has gotten a bad rap for allegedly making the app too “fun.” That’s hogwash. The app is easy and intuitive to use. I like that.

Now, currently, Robinhood only permits you to buy and sell the following cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, Bitcoin SV, Litecoin, Ethereum Classic, and Dogecoin. It’s a relatively small list, but a pretty good one too. Bitcoin and Ethereum are two big boys that normally get the most press attention, and Dogecoin is more a gambling play, but it’s nice that Robinhood includes it, particularly with so much attention coming to Dogecoin of late. (I have holdings in all of the cryptocurrencies that Robinhood currently offers.)

Because of the nature of cryptocurrencies, trading happens 24/7, and you can buy and sell crypto on Robinhood any hour of the day and night, every day of the week. And you can do market and limit orders only, which is fine for me.

    No Transaction Fees at Robinhood

Another nice aspect of Robinhood, in comparison to a number of other crypto trading platforms, is that Robinhood doesn’t charge you a transaction fee on crypto or stock transactions. That can be particularly important if you lean more towards frequent trading, which I do not.
Robinhood Isn’t as Tax-Friendly

One negative of Robinhood is that they don’t let you pick and choose which lot you sell, and this has important tax implications. Say, for example, I’m really rich, and I bought one Bitcoin last July when it cost $10,000; a second Bitcoin in January of this year for $30,000; and a third bitcoin last week for $60,000. (Robinhood lets you buy fractional shares of crypto, so you don’t need to purchase a whole Bitcoin — I just wanted to make the math easy.) I then decide that I need some money, and want to sell one of my Bitcoins at the current price of $50,000. Depending on which coin I sell, my capital gains will be different, and thus my tax hit as well. The first coin has a $40k gain, the second a $20k gain; and the third a $10k loss. So, I’ll either owe taxes on the first two, or be able to take a partial write-off (a capital loss) on the third, depending on which coin I sell. Unfortunately, Robinhood, unlike other platforms, doesn’t give you a choice of which coin, or which stock, you sell. They follow a policy of “First In First Out” (FIFO), meaning, the first stock they sell is the first stock you purchased, and then they work their way down the list chronologically. So they’d sell the oldest Bitcoin investment first, the coin you purchased for $10,000. The3n if you sold another coin, they’d sell your second coin, the $30,000 one. It’s strange that Robinhood has this limitation, as it’s a pretty basic aspect of financial trading and tax law to let people choose which specific stock or coin lot they wish. Hopefully, Robinhood will see the light and rectify this.
Robinhood Won’t Let You Import and Export Crypto

One final negative, which doesn’t bother me, but it does some of the more advanced crypto investors: You can’t import and export your cryptocurrency into and out of Robinhood, moving it to and from other cryptocurrency trading platforms. (As an aside, Robinhood does let you move stocks to other services, but does not let you move stocks in from other services.) Again, this doesn’t bother me, but it is something others have complained about.