Should You Use Robinhood to Buy Bitcoin?

There are some advantages to using the trading app, but it isn't right for everyone.

Robinhood is best known as the stock trading app that pioneered the concept of commission-free trading several years before most brokerages got rid of their trading costs. But you can also buy Bitcoin and six other cryptocurrencies directly through the app.

Like all cryptocurrency trading platforms, Robinhood isn't the best choice for everyone. Here's a rundown of the key advantages and disadvantages of using Robinhood to buy Bitcoin.

Benefits of using Robinhood to buy Bitcoin

Robinhood pioneered commission-free stock trading several years ago, and while its competitors have largely caught up to the company's pricing structure in the brokerage side of the business, the same cannot be said of cryptocurrency trading.

Specifically, many of Robinhood's top competitors have expensive and somewhat hard-to-understand pricing structures. For example, Coinbase charges a 1.49% trading fee for most transactions, so if you want to buy $500 worth of Bitcoin, you pay about $7.50. And that's on top of a markup, or spread, you pay over the current market price. To be fair, Robinhood makes money from the spread between its current buy and sell prices, but that's it -- no other fees apply.

There's also value in having your cryptocurrency holdings and stock investments in the same easy-to-use app, and Robinhood certainly lets you do that. Many people look at Bitcoin as an addition to their investment portfolios, so it makes a lot of sense to keep all of your investments in one place. With Robinhood, you can. With many other cryptocurrency exchanges, not so much.

Drawbacks of using Robinhood to buy Bitcoin

By far, the biggest drawback to Robinhood's cryptocurrency trading platform is that all you can do is buy, hold, and sell your cryptocurrencies. In other words, you can't send your Bitcoin to another cryptocurrency wallet, spend it on real-world purchases, or receive Bitcoin from other people. It doesn't have nearly as much functionality as most leading cryptocurrency exchanges do.

Robinhood also offers far fewer educational resources and other features. It is mainly a place where you can buy, hold, and sell Bitcoin and a few other types of cryptocurrency. If you buy Bitcoin on Robinhood and it goes up in value, you can sell it and make money. But there aren't many other reasons to use Robinhood for your cryptocurrency needs.

Finally -- and this point won't apply to investors who only want to buy Bitcoin -- more avid cryptocurrency traders will find that there are other platforms with far more cryptocurrencies to choose from than the seven Robinhood offers. If you want to invest in Bitcoin and the other most popular digital assets, Robinhood probably has what you need. But if you're thinking of putting some of your money in smaller, up-and-coming cryptocurrencies, you might want to look elsewhere. For example, Coinbase offers more than 90 tradeable coins.

Should you use Robinhood to buy Bitcoin?

The short answer is that it depends why you want to buy Bitcoin. If your goal is to pay for purchases using Bitcoin, or if you want to send Bitcoin to friends or to an external Bitcoin wallet, Robinhood is not the best choice for you. On the other hand, if your goal is simply to hold Bitcoin and benefit from rising prices over time, Robinhood can be an easy and low-cost way to do it, especially if you're already using the platform for stock trading.