Crypto Trading on Robin Hood: it’s not good
Robin Hood, the app that enables people to invest any amount in the stock market without paying commissions has been getting into the crypto space.
It’s been rolling out cryptocurrency trading for various users around the country, and it’s incentivizing behavior that’s completely lacking in nuance. I’d say it’s somewhere between bad product design and downright irresponsible or unethical behavior.
Compared to the regular stock trades on Robin Hood, the crypto looks all sleek and glowy and futuristic. That’s fine. But the problem is that just below the graph, instead of market statistics or anything informative, it’s live stream of people’s comments — everyone excited and confused and offering questionable investment advice.
Behaviorally, what does this do? It fuels emotional decision making and groupthink. Whenever someone using this app goes to make a crypto trade, they’re going to have to listen to the peanut gallery first.
And gets worse. Since Robin Hood doesn’t actually give you the ability to see what address(es) you’re using and doesn’t allow crypto funds to be transferred in or out, all trades that happen on Robin Hood purely exist for speculation.
Think about it. If the only thing you can do with crypto on Robin Hood is buy and sell it for USD, it’s impossible to do anything except speculate. You can’t use the ETH you bought for gas in a smart contract because you can’t transfer it out of the Robin Hood app. You can’t send a Bitcoin payment because you can’t transfer it out of the Robin Hood app.
This means that Robin Hood is only going to increase the volatility of the cryptocurrency prices because the only thing you can use Robin Hood for, in terms of crypto, is to try to beat the market. By increasing access and demand to these cryptocurrencies, it will also drive the prices of those crypto prices up, but exclusively because of speculation and not at all because people are actually trying to use those currencies for any type of transaction. That, uh, kinda sounds exactly like the stuff that drives bubbles.
But perhaps Robin Hood is doing a good job directing people to resources where they can learn about crypto and make educated decisions?
Nope.
Robin Hood’s “Crypto Education” page, at the type of writing, is pathetic and inaccurate:
There are even errors here, in these few pitiful sentences. Cryptocurrencies are unique for a few reasons, but they are not unique because they have no physical form and exist only in the network. There have been mutual credit systems that do exactly this long before money was even digital, and plenty that thrive and facilitate a real, productive economy even today.
Perhaps it’s a typo, but the second sentence in the middle paragraph also seems to equate supply with circulation.
I really, really want to believe that lowering barriers to entry is a good thing. I really, really want to believe that by granting people access they can become empowered to use those things to benefit themselves and their communities. But that’s simply not what this app is doing right now.
In fact, a lot of people are probably going to get cranky when they lose money, and then the SEC is likely to (somewhat justifiably) feel the need to put in and enforce more condescending restrictions on who can buy crypto and how they can do it.
This is basically all the vacuous, greed-driven aspects of crypto with none of the merits of real productive uses for blockchain or the for what crypto can actually achieve.
