Which is Better for Cryptocurrency Investing, Coinbase or Robinhood?

Deciding between Coinbase and Robinhood for cryptocurrency trading hinges on your specific requirements, particularly the frequency of your trades and the associated costs.

Coinbase caters to seasoned cryptocurrency traders, offering a comprehensive platform for digital currency exchange. On the other hand, Robinhood functions as a versatile trading app allowing users to trade not only stocks and ETFs but also certain types of cryptocurrencies without incurring upfront costs.

Although both platforms serve overlapping user bases, they differ significantly in their operational models and regulatory histories. Coinbase faced legal action from the Securities and Exchange Commission (SEC) in June 2023 for allegedly operating unlawfully as an exchange, broker-dealer, and clearing agency, along with the sale of unregistered securities. Conversely, Robinhood settled with the SEC in 2020, agreeing to a $65 million payment due to allegations of misleading customers regarding payments received from trading firms for order routing.

Despite these regulatory challenges, both platforms continue to operate, each with distinct features and characteristics.

Coinbase vs. Robinhood: Cost

Comparing the cost structures of Coinbase and Robinhood reveals significant differences, complicated further by Coinbase’s somewhat opaque fee disclosures and Robinhood’s indirect fee model.

Robinhood’s fee system is relatively straightforward compared to Coinbase’s. With its commission-free model for stock and options trading extended to cryptocurrencies, users don’t incur direct trading fees. Instead, the cost is integrated into a spread markup, resulting in slightly higher purchase prices and lower selling prices compared to the market rate at the time of the transaction.

In contrast, Coinbase’s fee system is intricate and recently underwent changes that obscure the fees for its basic service. Fees vary based on transaction size and tier of service, with higher costs associated with smaller transactions on the basic tier. Specifically, for smaller trades, users face a spread markup of 0.5 percent plus a fixed fee determined by the transaction size.

Coinbase’s fee structure

For transactions as low as $10, the associated fee consumes nearly 10 percent of your purchase. Even at $200, you’re still facing a substantial fee of around 1.5 percent. This fee is in addition to the 0.5 percent spread markup already incorporated into the purchase or sale price.

For purchases exceeding $200, the 0.5 percent spread markup remains constant, but the additional fee varies depending on the funding source.

Coinbase funding fees

Choosing Coinbase Advanced, the premium service tier, can potentially lead to lower overall fees, especially for smaller trades. While the fee structure is clearer in Coinbase Advanced, it’s still scaled and contingent on whether you’re adding or taking liquidity. Adding liquidity incurs commissions ranging from 0 to 0.4 percent of the trade value, while taking liquidity results in commissions ranging from 0.05 to 0.6 percent.

Advantage: Robinhood, due to the simplicity of its fee structure, despite its disclosure being similar to Coinbase’s.

Coinbase vs. Robinhood: Available coins for trading

Coinbase boasts support for over 200 different cryptocurrencies, including major players like Bitcoin, Ethereum, Cardano, Solana, and Dogecoin, among others. While it doesn’t feature thousands of smaller digital currencies, this breadth is likely more than sufficient for the majority of traders.

In contrast, Robinhood offers trading options for just 15 digital currencies, including Bitcoin, Ethereum, Dogecoin, and others. However, the app provides real-time data on these currencies and additional ones.

Advantage: Coinbase, due to its extensive selection of available coins.

Coinbase vs. Robinhood: Types of securities offered

Coinbase exclusively focuses on cryptocurrencies, meaning it doesn’t offer traditional securities like stocks, ETFs, or options. On the other hand, Robinhood provides a more diverse selection, including stocks, options, ETFs, and cryptocurrencies. While it doesn’t include bonds or mutual funds, Robinhood’s range still caters to a broad audience.

Advantage: Robinhood, for its wider variety of offerings.

Coinbase vs. Robinhood: Cryptocurrency custody

If you prefer to manage the custody of your cryptocurrency assets independently, Coinbase is likely your preferred choice. It provides its own wallet, but also allows users to take custody of their assets using their preferred wallets, whether hardware or software-based. This flexibility enables users to select the solution that best suits their needs, whether they prefer self-custody or leaving it with Coinbase for trading purposes.

Robinhood offers the Robinhood Wallet app, which is separate from its main platform. This app serves as a self-custody wallet, allowing users to store and manage their cryptocurrencies on networks like Ethereum or Bitcoin.

Advantage: Coinbase, due to its provision of more custody options. However, for frequent traders, this distinction may be less significant.

Coinbase vs. Robinhood: Staking rewards

Coinbase and Robinhood also diverge notably in their support for cryptocurrency staking, a process wherein cryptocurrency holders earn rewards on their holdings, akin to earning interest on a bank account, albeit with distinct differences and risks.

Coinbase allows users to stake their crypto assets, which are then utilized to validate transactions on the respective currency’s blockchain. Currently, customers can earn staking rewards on numerous cryptocurrencies, including Ethereum, Tron, and Cardano. Coinbase manages the technical intricacies behind the scenes, and users receive additional coins for retaining their assets on the platform.

As of May 2024, Robinhood only provides staking support for Solana.

Advantage: Coinbase, for its broader offering of staking rewards across multiple cryptocurrencies.

In Conclusion

Ultimately, the better choice between Coinbase and Robinhood depends on your specific requirements. Coinbase is better suited for individuals heavily focused on cryptocurrency trading or who require access to a wide variety of crypto assets. Conversely, those interested in trading a few popular cryptocurrencies as part of a broader investment portfolio may find Robinhood to be a more suitable option. Additionally, individuals exploring alternative platforms may also consider checking out Webull, which also provides cryptocurrency trading services.