You Can Buy Crypto on Robinhood. But Should You?

For proof of investors’ growing interest in cryptocurrency, look no further than the financial apps already on your phone. 

Digital payment giants PayPal, Venmo, and Cash App — along with mobile stock-trading platform Robinhood — are making it easier to invest in cryptocurrency than ever before, with options to buy and trade coins within their apps.

But even if you feel more secure buying crypto with an app you might already use over a cryptocurrency exchange you’ve never heard of, the risk and volatility remains. Some of these mainstream players are also far more limiting in what they offer than traditional cryptocurrency trading platforms. 

Here’s what you need to know about buying crypto outside of cryptocurrency exchanges, and how to decide what makes the most sense for you.

Mainstreaming Cryptocurrency

Apps like PayPal and Venmo make accessible entry points for crypto novices to dip their toes in the water. And, depending on how you already use the apps, their offerings may be well-suited to your knowledge base and interests. 

For example, someone with zero knowledge but a few dollars to spare might find an exchange like Gemini confusing, but may be willing to buy some Bitcoin through their Venmo account just to experiment as they start to learn.

In general, experts say these apps can be great places to start if you’ve decided it makes sense to invest in cryptocurrency, but don’t quite understand all the different types of crypto, how an exchange works, or different storage options. 

Whereas using a more traditional exchange might seem complicated, you can just log into your account and buy what you want without having to worry about it, says Tyrone Ross, financial advisor and CEO of Onramp Invest, a crypto investment platform for financial advisors. “For newbies, I really suggest going to PayPal, Venmo, Cash App types of places, because they make it as simple as possible.”

Even for investing pros, cryptocurrency can be daunting. Personal finance expert Suze Orman recently told NextAdvisor about her first attempt. “Truthfully, I didn’t really know how to buy a large amount of Bitcoin and crypto,” she says. “Coinbase was aggravating me, I had bought a little bit of it and then I sold some, but it was just too complicated for me — even though it’s not complicated at all.”

She instead decided to invest indirectly, through stock in companies with crypto holdings, but she’s recently come back around to buying crypto, this time on PayPal. “I own now $5,000 in Bitcoin, and I do it through PayPal because it was just easy to do it,” she says.

How These Apps Differ From Crypto Exchanges

There are some important distinctions between using a fintech app to buy crypto versus a traditional exchange like Kraken or Crypto.com, largely involving ways you can (or can’t) transact, and limitations on where you can keep the crypto you buy. 

Payment Platforms and Cryptocurrency

PayPal, Venmo (which is owned by PayPal), and Cash App each operate a bit differently when it comes to crypto. Each of these apps offer different coins, and various fee schedules for buying and selling crypto. While Cash App does allow you to move your coins off the platform or move Bitcoin you hold elsewhere into your account, that’s not an option on PayPal or Venmo.

Robinhood Crypto

Robinhood offers a few types of cryptocurrencies (like Bitcoin, Ethereum, Bitcoin Cash, and even Dogecoin), which you can buy and sell within the app. Like its other investment options, a big perk of trading crypto on Robinhood is a lack of fees, which can widely vary among traditional exchanges.

Its accessibility as an investment platform is a big draw for many — whether they’re investing in crypto or the stock market — but it’s also what can make Robinhood riskier. It’s been criticized for making trading too game-like and encouraging volatility through active trading, rather than long-term investment growth. Just like stock trades, approaching an already-speculative asset like crypto with that mindset can make your investment even more of a gamble. 

When it comes to crypto specifically, Robinhood recently announced it’s creating its own digital wallet for its crypto users. Previously on Robinhood, you couldn’t move your private key (the encrypted code that grants access to your cryptocurrency) into your own wallet, or trade on an exchange like Coinbase. For believers in the crypto mantra “not your keys, not your coins,” that was a major drawback.

Still, not many details have been released about Robinhood’s wallet, including fees, specifics around security and private and public keys, or any other features. 

Whether you’re considering Robinhood or an app like Venmo, remember that cryptocurrency is highly volatile. Even if you’re just putting in a few dollars to experiment, it’s smart to approach your investment with a long-term mindset — once you’re sure it won’t stand in the way of your other financial goals — and be prepared to buy and hold over time rather than participating in active trading.

Should You Choose These Over Traditional Exchanges?

Even the more popular cryptocurrency exchanges — like Coinbase and Gemini — may not be platforms you’ve ever heard of or trust with your financial information. And others are simply difficult to navigate, making the process of buying crypto even more complicated for beginners. 

Because there’s little federal regulation, it can be difficult to evaluate how secure or reputable a traditional crypto trading platform is. While apps like Venmo or PayPal can’t protect your crypto holdings under FDIC insurance like they can your cash, familiarity with these apps can make the experience a bit simpler — maybe you already have your financial information linked, or the user interface is just more familiar.

“How much transaction volume and transparency into their financials and business operations I really think is the stuff you want to look at,” says Douglas Boneparth, a financial advisor and president of Bone Fide Wealth in New York. “Are most people going to do that? No, they’re going to find the easiest app to download and link their bank account, and make it easy to buy crypto again. That’s kind of the appeal of mobile apps [like PayPal and Cash App] and the like.”

But many experts view the apps as a jumping off point, not necessarily somewhere they’d recommend you keep your coins long-term. 

“It’s going to be a great way to get people introduced to the crypto space,” says Spencer Montgomery, founder of Uinta Crypto Consulting, a program for new investors to learn about crypto. But as they become more involved, “I expect that a lot of them, as they see success with it, will want to learn more, and as they learn more they’ll realize that there are better ways to be buying Bitcoin and move off of that.”

At some point, you may decide you do want control over your keys and your coins after all — and that’s why a more traditional exchange may be a better choice. For example, if an initial investment later saw a significant increase in value, you might want to move your crypto offline for greater security from cyber threats — something that wouldn’t be possible on Venmo or PayPal.

If all your crypto is on a platform that doesn’t allow offline storage, your only option is to keep it and put more money in on another exchange — leaving your assets in multiple places —  or sell what you have at the current price before buying elsewhere. 

If you choose an exchange like Coinbase from the start, which offers the option to keep your coins on the platform or trade and store them on your own, it can be much simpler to ease into those activities if you want to in the future.

It all comes down to the learning curve. “Exposure leads to expansion,” Ross says. “As you’re exposed to the space and you learn more and you get into the crypto economy, you’re going to realize, oh wait, there are all these other things I can do.”    

Whatever option you choose, just remember that cryptocurrency is still a highly speculative asset. It can be a worthwhile way to diversify your portfolio, even if you’re just experimenting, but you should only invest what you’re prepared to lose. 

No matter whether you put a few dollars into Bitcoin through Venmo, or you’re prepared to buy on an exchange and hold your coins in an offline wallet, only do so after you have your other financial priorities in order, like an emergency fund and traditional retirement plan.