Why Robinhood Crypto Will Fuel Gains in All Cryptocurrencies

You may not have even heard of it, but Robinhood Crypto is a major development for cryptocurrencies that will play a key role in driving coin prices higher this year.

Since its launch in 2015, the Robinhood stock-trading app - popular for its lack of commission fees and easy-to use interface - has made waves mostly among millennials.

Related: What's the Best Cryptocurrency to Buy in 2018?

But in January, the Palo Alto, Calif.-based startup announced Robinhood Crypto - a new feature for the app that allows the buying and selling of cryptocurrencies without commission fees.

Robinhood Crypto launched Feb. 22 in five states - California, Massachusetts, Missouri, Montana, and New Hampshire. Customers can buy and sell Bitcoin and Ethereum and track market data for 14 other cryptos.

The company will continue rolling out the service to more states as it gets regulatory approval. I expect Robinhood Crypto will also enable the purchase of more cryptocurrencies as it gains experience.

Robinhood Crypto offers an easy on-ramp to those new to the cryptocurrency world, particularly those of the millennial generation.

These prime ingredients lie at the heart of why this new service will be such a potent catalyst for cryptocurrency prices.

Frankly, it's a perfect storm...

Why Robinhood Crypto Has So Much Potential

To understand why Robinhood Crypto will have a dramatic impact on cryptocurrency prices, you need to take a closer look at the Robinhood app and its millennial audience (people between the ages of 18 and 35).

Robinhood was created by two friends who met at Stanford University, Vlad Tenev and Baiju Bhatt. They saw that brokerages paid next to nothing to trade equities and wasted a lot of money on networks of storefront locations and advertising.

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Instead, they focused on building a smartphone app that made stock trading easy and free. (Robinhood makes money by offering a higher tier of service, Robinhood Gold, for a $6 monthly fee, and by collecting interest on the cash and securities held in customer accounts.)

The idea has impressed venture capitalists, who have poured $176 million into the startup over the past five years.

The no-fuss nature of Robinhood (and the fact that it lives on a smartphone) made it a hit with millennials - the group makes up approximately three-fourths of the company's more than 4 million customers.

That's phenomenal growth...

In just three years, Robinhood's customer base has surpassed that of entrenched online brokerage E*Trade Financial Corp. (Nasdaq: ETFC), which spent 35 years accumulating 3.6 million customers.

The announcement of Robinhood Crypto was greeted particularly enthusiastically. Within 24 hours of the Jan. 25 announcement, 600,000 people had put their names on a waiting list. Four days later, the list had grown to more than 1 million names.

"Bitcoin's anti-establishment roots and decentralized system brings with it the hope for a new economy that puts people over corporations," Julia-Carolin Zeng, a spokeswoman for BitcoinSportsbooks.com, told MarketWatch. "This is an extremely appealing message to millennials who watched their job outlooks dwindle as the financial crisis unfolded in tandem with their first-ever entry into the job market."

But few realize just how big the millennial appetite for cryptocurrencies is - and how dramatically their buying will affect prices...

Why Millennials Will Drive Cryptocurrency Prices Higher

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In a survey of 2,000 people by Blockchain Capital last fall, nearly one-third of millennials (32%) said they were "somewhat likely" or "very likely" to buy Bitcoin in the next five years.

And 27% of millennials said they'd prefer $1,000 of Bitcoin over $1,000 of stocks, and 30% said they'd prefer $1,000 of Bitcoin over $1,000 of government bonds.

Other age groups expressed far less interest in buying Bitcoin. Just 5% of those 65 and older preferred Bitcoin to either stocks or bonds. When including all age groups, just 14% preferred Bitcoin to stocks, and 18% preferred Bitcoin to bonds. Only 19% said they were likely to buy Bitcoin over the next five years.

Robinhood Crypto matches this eagerness to buy cryptocurrencies with an app tailored to the millennial lifestyle.

To drive the point home, the company has added a social media feature to Robinhood Crypto, called "Robinhood Feed," which lets users chat about cryptocurrencies with other members of the community. Borrowing a page from Amazon.com Inc. (Nasdaq: AMZN), the "people also bought" feature shows users names of stocks other members purchased in addition to the one shown on the screen.

But what will really push cryptocurrency prices is the sheer size of the millennial generation.

In 2016, millennials passed the baby boomers to become the largest living generation in America, numbering about 75 million. This group is now at an age where it is looking to invest - and it prefers cryptocurrencies.

Even a modest percentage of crypto-buying millennials equals millions of new investors adding billions of dollars of fresh money to the market. That increase in demand is what will push prices higher.

And not just Bitcoin and Ethereum prices. People often obtain those two cryptocurrencies to buy lesser-known names, since many cryptos can only be bought with Bitcoin or Ethereum. (Yes, it's true that Robinhood hasn't yet enabled the withdrawal of purchased crypto, but the website says it will do so "in the near future.")

The influx of new capital is reflected in several very sunny Bitcoin price predictions.

For instance, Fundstrat's Tom Lee has forecast a mid-year Bitcoin price of $20,000 and an end-of-the-year prediction of $25,000.
Analysts Kay Van-Petersen of Saxo Bank and Dave Chapman of Octagon Strategy are even more bullish. Both see Bitcoin reaching $100,000 this year - more than nine times the current price of about $10,600.

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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