Robinhood is rolling out a new feature that lets you automatically invest in cryptocurrencies on a daily, weekly, or monthly schedule. The investment app says this service will let you automatically invest in things like Bitcoin, Ethereum, Dogecoin, and other supported cryptocurrencies without a commission fee.
Before we move on, however, I want to warn you that this article does not constitute financial advice. Talking to an expert can help you create an investment strategy that is right for you.
Robinhood’s strategy here is not trading but automatic investing. When an algorithm determines that it would make financial sense, Robinhood will not sell crypto on your behalf. It’s simply building your crypto portfolio.
Robinhood pitches this as a way to do “dollar-cost averaging,” which is more or less financial speak for not worrying about what the market is doing and instead investing the same amount regularly, letting the gains and losses come out in the wash. In other words, you’re adhering to the financial maxim “time in the market beats timing the market.” Of course, in this case, the market isn’t an index fund or anything like that; it’s cryptocurrencies, which have a reputation for being rather volatile. Whether this strategy works for Bitcoin et al. is probably a question for more finance-focused publications and experts.
“HODLING” or holding on to your stocks has been a common meme in Wall Street Bets and crypto communities. Sometimes they will encourage people to hold their stocks through any losses in the hopes of making a profit later.
ROBINHOOD’S APPROACH IS A TRADITIONAL FINANCE METHOD THAT IS APPLIED to CRYPTO
Other cryptocurrencies offer different rewards for holding them. Coinbase has been giving users extra coins for keeping certain cryptocurrencies since 2019. That kind of system is the basis of an alternative mining system called proof-of-stake, which looks to solve the energy demands of the more traditional proof-of-work methods. Proof-of-stake systems allow miners to put up crypto as collateral in exchange for the chance of creating a block. If they are selected, they will receive a reward.
Robinhood’s approach to finance is more traditional than the new technology, but Robinhood’s approach is very different. The fact that the feature is not available in New York City, a major financial hub in the US, is ironic. According to the company, the part will gradually roll out to users over the month.