The bedlam in Wall Street has seemingly spilt over into the crypto sector
Yesterday, the US-based commission-free online broker Robinhood announced it was halting trading of some stocks. The move has resulted in an uproar among traders and investors who are currently over a barrel. Many have questioned the rationality of Robinhood holding its customers’ crypto assets.
The option to move the assets to a different destination is not on the cards either as the broker has blocked crypto withdrawals too. Crypto users now face a nightmare as they are at a dead end. To exit the platform, the customers need to trade their crypto in exchange for cash. However, this adds to the quandary they are currently caught in.
Selling the crypto means users have another tax problem (resulting from capital gains) to worry about. There’s barely a way out, leave alone an easy one, for crypto investors using the platform at the moment.
Robinhood, founded in 2013, initially started as a brokerage platform for trading stocks and ETFs. The online broker then introduced crypto services after bringing onboard a wave of retail investors. Robinhood gradually introduced Bitcoin and Ethereum trading on the platform at the beginning of 2018.
However, the latest turn of events around the platform has landed it on the wrong side of traders– some saying the platform has started ‘robbing the hood’. The platform’s crypto exposure model has been faulted and criticised heavily. While Robinhood offers its customers exposure to cryptocurrencies, it doesn’t have a provision for customers to transfer the assets to a wallet of their choice.
The biggest challenge Robinhood crypto users face, at present, is withdrawing their assets from the platform without triggering tax consequences. Industry experts believe the predicament is an eye-opener and a reminder to traders that it is not ideal to use brokers for crypto trading.
Investors with crypto on the platform will have to take the hard approach and maybe move to buy actual assets that they can custody themselves.