Robinhood is the commission-free brokerage mobile app while Coinbase charges very hefty commissions. At first glance Robinhood takes the prize, but between Robinhood vs Coinbase stock, a much closer inspection is warranted.
Neither company made it this far without being subjected to significant controversy. Robinhood has been heavily criticized for its payment-for-order-flow business model while Coinbase has innovated in a sector that has been scrutinized by regulators.
The traditional financial system is being forced to adapt to the changes these two marketplaces pioneered. From cryptocurrency to fractional share trading, Robinhood and Coinbase forged new paths in a centuries-old financial industry.
Which is the best stock to buy now?
Robinhood Has Been Steeped In Controversy
Robinhood was founded in Menlo Park, California by Vladamir Tenev and Baiju Bhatt in April 2013. The company promised commission-free trading and gave retail investors access to innovative trading tools via its mobile app.
By 2019, the company regularly made headlines for the ways its users “gamed the system.” The Robinhood infinite money glitch, for example, gave traders access to infinite money on loan through margin.
Soon after, a 20-year-old customer named Alexander Kearns committed suicide after believing he owed over $730,000. Soon afterwards, Reddit’s WallStreetBets community waged war against hedge funds by targeting heavily shorted stocks.
Nevertheless, Robinhood managed to steer its ship through the choppy waters and offer something Coinbase likely quaked in its boots at seeing: commission-free cryptocurrency trading.
Is Robinhood a Good Place to Buy Crypto?
Robinhood has over 21 million monthly active users and over $100 billion in assets under custody. Interest in cryptocurrency trading continues growing in this active community, with 60 percent of funded accounts trading in crypto during the second quarter alone.
The app offers seven cryptocurrencies: Bitcoin ($BTC), Bitcoin Cash ($BCH), Ethereum ($ETH), Ethereum Classic ($ETC), Litecoin ($LTC) and Dogecoin ($DOGE). The latter experienced explosive growth in 2021 on the back of support from billionaires Elon Musk and Mark Cuban.
Crypto purists warn that you don’t technically own your crypto assets on Robinhood, however. There are no keys provided, so you can’t send and receive them. This is one of many problems the app’s critics point out.
A Tale of Poor Liquidity Mired Robinhood
Although it successfully democratized investing, Robinhood walks a fine line. The company shut down trading in highly shorted stocks at the start of 2021, and that caused a furore that eventually led to a congressional hearing.
Robinhood and its CEO Tenev are accused of manipulating markets by regulators, which also annoyed a portion of the retail userbase it serves. The firm’s liquidity issues at the start of the year led to scrutiny from its financial partners too.
There’s a risk that Robinhood itself could draw volatile price swings from angry retail traders. And it lags behind its peers in profitability, squeezing only $7 million in profits out of 2020. This has bearish investors seeking an alternative.
Is It Safe to Buy Crypto on Coinbase?
Unlike Robinhood, Coinbase is solely focused on crypto trading. This means the company’s exchange wallets enable sending and receiving of over 50 cryptocurrencies supported by the exchange.
And being a high-value target means Coinbase is constantly under attack by hackers. In August 2021, the company sent an email to over 125,000 users warning of a cyberattack. This has some crypto HODLers moving their funds from the exchange’s hot wallets.
Coinbase has two wallet apps, and that means you don’t need to use the exchange to store your crypto assets with the company.
What’s the Difference Between Coinbase and Coinbase Wallet?
Coinbase is THE cryptocurrency exchange market. It features an exchange wallet that enables easy liquidation. However, some crypto enthusiasts prefer to hold their assets long term and don’t trust these exchange wallets. That’s why they store crypto in a separate wallet, and Coinbase (COIN) has one of those too.
The Coinbase Wallet is separate from the Coinbase exchange, although both are owned assets of the Coinbase company. Using this wallet, you can store crypto without a Coinbase exchange account. It allows you full control and access of your owned crypto assets.
However, this doesn’t tell you anything about the underlying company and its financial performance, which we will dive into next.
Is Coinbase a Good Stock to Buy?
Coinbase can support a market capitalization of $60 billion, based on its most recent quarter’s revenue of $2.23 billion. However, it issued guidance indicating a slowdown in the upcoming quarter, which could drop the valuation closer to $50 billion and allow investors to jump in at cheaper COIN price levels than the April 2021 IPO.
In fact, it still hasn’t reached its valuation of $86 billion on its market debut, and it could be another year before investors are fully convinced of its staying power. A big hurdle for investors is that Coinbase’s valuation is heavily dependent on the crypto market. Even more so now that the company is adding crypto to its own balance sheet.
A volatile crypto market could mean the stock will continue to take investors on a wild ride before potentially reaching a $100 billion valuation. And some bearish investors believe it could have serious trouble showing a 4x return through 2030.
Robinhood vs Coinbase Stock: Which Is Best?
Robinhood and Coinbase are pioneering FinTech tools that put the average person in charge of their own financial future. These sleek apps provide easy access to crypto and stock markets. Robinhood is cheap but sells customer order flow to Wall Street giants like Citadel while Coinbase charges very steep commissions to its users.
What do they have in common? Both companies have volatile share prices that are dependent on people continuing to invest. Whether those investments lean toward traditional or crypto assets as the economy enters a post-pandemic recession remains to be seen. For now, Coinbase has earned a reputation as having a trusted brand name while Robinhood is frequently tarnished with concerns due to its primary monetization model and other headline scandals that have rocked it over the past few years.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.