Coinbase and Robinhood may turn into fintech adversaries, as they try to onboard more users. The two apps aim to bring a smooth process and may be battling for the same user pool.
Coinbase and Robinhood may start a battle to become the go-to fintech app for crypto usage. The apps may compete for onboarding, but also on conditions for activities such as trading and staking.
Coinbase and Robinhood already bring in a similar range of monthly active users. Interest in retail access to investments, as a tool to offset inflation, drove the growth of the apps. For Coinbase, the 2024 bull market brought 8M monthly active users. Robinhood reported 11.9M monthly active users in 2024. Both apps show some setbacks since 2021, but are regaining confidence as investors return.
The most interesting fintech battle for the next 5 years is going to be @coinbase vs @RobinhoodApp .
Below are some of the battlefronts they’ll be competing on:
1. Trading. Coinbase charges trading fees, Robinhood does not.
2. Tokenization. Robinhood is already a registered… pic.twitter.com/von8p8jDGa
— Michael Nadeau (@JustDeauIt) August 13, 2024
Robinhood lags as a crypto app
Robinhood only offers around 35 crypto assets, and it’s especially limited to EU users. The app works as a simple brokerage, for exposure to already well-established coins and tokens. The careful selection of tokens, however, lags behind the crypto market.
Robinhood still carries assets that have failed to recover and exist as ghost chains with almost no activity. The need for regulations means Robinhood lacks the infrastructure to quickly change its portfolio. For more conservative users, Robinhood remains a good source for exposure to blue-chip assets and stablecoin usage.
In the coming years, Robinhood may expand its capacity to offer crypto access, after acquiring the Bitstamp exchange in June.
The big problem with Robinhood was its ability to freeze trading or liquidate user assets. The quick crypto crashes mean users lose control of their portfolios through Robinhood. Wallet-based ownership gives more opportunities to trade in all market conditions, putting Coinbase’s infrastructure as a crypto leader.
Coinbase, however, expanded its infrastructure through the tokenless Base chain, in addition to its smart wallet. The Coinbase smart wallet offers an easier login and immediate exposure to all features on Base, including NFT and meme tokens.
More than 289K smart wallets have been created, and Coinbase sees a pickup in daily user activity. Coinbase still relies mostly on its centralized accounts, but aims to offer direct onchain access for small-scale users aiming for experimental features and low-cost tokens and NFT.
Coinbase still lags for traditional assets
One of the hopes of Coinbase is that Base could carry tokenized real-world assets. Robinhood has a clear advantage in offering access to stock markets, as well as derivative trading. Tokenization on the blockchain is still at an experimental stage, with fragmented liquidity.
Additionally, Coinbase will have to prove its user count is not based on registered wallets, in addition to non-organic bot activity.
Robinhood has a broker-dealer registration and offers access to options, stocks, ETFs, as well as techniques like margin trading. Coinbase also carries a broker-dealer license since 2018, but has left it unused.
In terms of market valuation, Coinbase is the winner with a $49B market cap, with COIN shares trading at $197.94 as of August 14. Robinhood is valued at $16.29B, with a share price at $18.41. The movement of both COIN and HOOD track the overall market sentiment, and move in the same direction.
The biggest competition between Coinbase and Robinhood would be for fair exposure targeting retail investors. Robinhood still has to reassure its clients about trading freezes in unfavorable conditions. Coinbase will always have access to 24/7 markets, including the Wintermute algorithmic trading platform. Robinhood mainly relies on payments for order flow, where retail orders are aggregated and sent to a wholesale broker.
For some, Robinhood has an advantage due to its low exposure to crypto risk. Despite offering access to coins, Robinhood still has not advertised itself as a crypto company. Coinbase, on the other hand, will always be tied to the fate of the crypto market, which is still relatively novel compared to stocks trading.
To decrease its risk profile, Coinbase turned to stablecoins like USDC, which offer transparent payment options similar to fintech apps. Coinbase also aims to support traditional financial companies by offering secure custodial storage for digital assets, especially the newly created ETF for Bitcoin (BTC) and Ethereum (ETH).
Cryptopolitan reporting by Hristina Vasileva
