Will Robinhood Slash Coinbase's Earnings?

Robinhood's feeless trading experience forced many of its competitors to say goodbye to one of their primary revenue sources. But will it also force the hand of cryptocurrency brokerages?

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What Happened: According to a Friday Fortune report, when Robinhood launched its feeless stock trading experience in 2014, five years later most of the competing brokerages purportedly "reluctantly followed suit, slashing their lucrative commissions to remain competitive." Similarly, Fortune suggested Robinhood's introduction of cryptocurrency wallet features — to be tested this month — may have a similar effect on competitors such as Coinbase Global Inc. COIN.

During Wednesday's Mainnet crypto conference in Manhattan, Christine Brown — chief operating officer of Robinhood’s crypto business — said cryptocurrency exchanges "still charging commissions on trading fees" are "insane."

Robinhood's description of its trades as free has been described as misleading by many, suggesting the firm's controversial practices result in higher costs for its users than they would have incurred by simply paying fees at competing exchanges.

As Fortune put it, "people who buy crypto the supposedly fee-free way basically guarantee that they will not get the best price upon execution of a trade." But Brown believes people will start paying attention to fees in crypto as more people get into the space and volatility decreases increasing the price sensitivity. For this reason, she concluded,  "When users move their dollars to a place where they can get commission-free trading, I think we'll see the rest of the market follow.”

Fortune explains that "Robinhood hopes to pull off the same trick in crypto that it once pulled off in the stock market." It remains to be seen if the company succeeds.

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Photo: Courtesy Robinhood