Robinhood has a new feature which allows you to automatically invest in cryptocurrency on a daily or weekly basis. This investment app claims that this feature will allow you to automatically invest in Bitcoin, Ethereum, Dogecoin and other supported cryptocurrency without paying a commission.
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 is not trading but automatic investing. The algorithm will decide whether it would make financial sense for Robinhood to sell crypto. It is instead building your crypto portfolio steadily.
Robinhood explains this as a way of dollar-cost averaging. This is financial talk for not worrying about the market and instead investing the same amount each month, with the gains and losses being swept away. This means that you are following the financial maxim of time in the markets over timing it. In this instance, the market isn't an index fund. It's cryptocurrencies which have a reputation as being volatile. It is not clear if the strategy works for Bitcoin et al. This is a question that experts and publications with a focus on finance should be asking.
The WallStreetBets and crypto communities have long had the idea of HODLing (or holding) as a common meme. Sometimes they will encourage people to hold their stocks through any losses in the hopes of selling them at a profit later on.
Robinhoods is a traditional method of financing crypto.
Other cryptocurrencies offer different rewards for holding cryptocurrencies. Since 2019, Coinbase has offered extra coins to users for holding certain cryptocurrencies. This system is the foundation of an alternative mining system called Proof-of-stake. It aims to reduce the energy requirements of traditional proof-of work systems. Proof-of-stake is where miners pledge their crypto to get a chance at creating a block. If they are selected, they will receive a reward.
Robinhood's approach is more traditional than traditional financial methods but with new technology. It is ironic that the feature is not available in New York City, which is a major financial hub in the US. According to the company, the feature will gradually roll out to users over the course of the month.