Robinhood was established in 2013, it is a free-of-charge platform that makes buying and selling of stock simple and easy. Regardless, it does not propose tax-advantaged interest accounts which are fundamental to creating long-standing wealth.
The exchange has bagged 21 million users and more than $102 billion in possession. It aims to be user-friendly, easy and reserved” to its operators.
The normal age for its operators is 31 years and up to 50% of them are baby investors as mentioned by a Robinhood diplomat.
Why Is Robinhood A Bad Choice For You?
Despite its free charges and user-friendly approach to their pinned users, stockholders should be cautious of the exchange platform.
Their halted stock quotes, downtime issue, payment for order flow, low customer service, Insignificant watchlist, etc have made it a bad choice of an exchange platform for a crypto enthusiast.
Why Is Robinhood Bad In Terms Of Crypto Exchange?
In comparison to the normal stock exchanges on the Robinhood platform, the cryptocurrencies appear sleek and glowy, with the future. This is nice. But the big issue is that below the market graph, rather than seeing the market statistics or informative displays, you end up seeing people’s comments and advice on a live stream. This regular action keeps users in confusion with lots of questions in their minds while others are wallowing in unnecessary excitement.
Psychologically, what will these do? It will only increase pressure for decision-making and group brainstorming. Whenever users want to initiate a trade, they have to sit back and hear the gallery conversation first; which is not supposed to be.
The situation is worse since Robinhood does not allow users to view the address they use or transfer funds into or outside the platform. Every trade taking place is on the Robinhood app and they all occur as pure speculation.
Here’s the case, the only thing users are allowed to do is buy and sell cryptocurrencies in USD. Nothing special outside speculation. Account owners cannot use their Ethereum for gifted contracts or use their Bitcoin for payments just because they can not transfer out of the Robinhood platform.
This entire assumption on which Robinhood is based will only increase crypto-price volatility because all an account holder can do with cryptocurrency in the app is to beat and watch the market;
Robinhood does this by increasing the demand and availability of cryptocurrencies. Unfortunately, it doesn’t stop at this, market prices will continuously shoot up as a result of sentiments that users live on.
Also Read: How to Activate Robinhood Debit Card?
Reasons Why You Should Not Invest With Robinhood App
1. Robinhood Utilizes A Speculative Business Technique To Earn Money
Options are tough for baby investors to comprehend, and sometimes they present endless threats of financial casualties.
In the first section of 2021, it earned 38% of the revenue generated by Robinhood. on every trade, their site made $2.90 different from the $0.40 made on every equity trade.
Robinhood’s substantial revenue from option stake gives it a reason to push new investors to buy and sell those unpredictable securities, and possibly relinquish their entire life savings on one trade. This is a threat to users but a strategy to Robinhood.
2. Robinhood Had Serious Issues With The Securities And Exchange Commission
Robinhood grants a commission-free transaction but still makes from each of the trades through a process called PFOF-(Payment for order flow).
When users initiate a trade, Robinhood works as a negotiator between the buyer and the seller. It arranges with stock owners or wholesalers to earn a slice of the bid( the difference between what the person on one end of a stock trade is willing to sell that stock for, and how much the person on the other end of the trade is willing to pay to buy it).
The larger the difference in the bid, the larger the gain of Robinhood. Even though it suggests that the buyer pays more than they could make at another trade to purchase the same stock.
SEC indicted this process that Robinhood uses to make money, therefore, fined them $65million for receiving its customers on how it makes money and $70million for employing baby investors to trade options. This will surely take Robinhood years to fetch the broken trust of its customers.
3. Robinhood Has Not Had A Useful Beginning Since Its Input Process Output Launch
With its first two sections, Robinhood has dwelled in a varying financial status. From that year to recent a net failure of about $1.9billion has been recorded.
This is quite a huge sum of money considering that the platform owed $3.5billion which caused an immediate funding alarm in 2020.
Robinhood’s constructive income of $122.9million made over the years has been swallowed up by $2billion expense made on liabilities and convertible notes.
It is debt distressing and certainly needs to improve income growth in order to lower its increased “debt-to-equity ratio of 40.6” and rationalize its percentage price.
4. Robinhood Has Lost The Public Confidence
Robinhood over the years has experienced a rollercoaster trend with numerous news-breaking crimes. In January, Robinhood froze trading, following the small investors’ rapid buy and sell of Gamestop shares.
Investors that lost their money during this freezing got irritated by the process and in combination with Reddit nation raised a shout to social media with the public point of view that Robinhood’s Chief Executive Officers must resign.
That same year, it was recorded that an enthusiast of Robinhood took his own life with fears of not repaying the debts he owes from trading options on Robinhood.
Robinhood’s application built stock-trading in a fun and simple way; Just like a game. This truly contributes to the losses made by baby investors on trading stocks and options.
Conclusion
Robinhood stands as a considerable way for investors new into the crypto world to grow their tentacles in the capital market. Nevertheless, it’s vital to understand that the zero-commission fee offered by Robinhood comes at a rate.
Once you succeed in building your knowledge and confidence around the walls of cryptocurrency, it’s necessary to create an account with the normal exchange platforms.
