Can You Day Trade Crypto on Robinhood?

Updated on October 13, 2023
At a Glance: Robinhood allows you to day trade cryptocurrencies, just like stocks, ETFs, and options. The platform is user-friendly, with no trading hours restrictions. However, the selection of cryptocurrencies available is limited compared to dedicated crypto exchanges. There are no transaction fees, and you can choose between limit and market orders. Opening a trading account requires identity verification due to regulations. Day trading is high-risk, and having a well-researched strategy is crucial. Robinhood’s past outages during volatile periods pose a risk, and decentralized platforms offer an alternative solution.

2021 has seen a major increase in the popularity of no-commission online stock brokers. Among these is U.S.-based Robinhood. If you’ve heard how you can trade stocks using Robinhood you may be asking, “Can you day trade crypto on Robinhood?” Read on to learn the answer.

Can You Day Trade Crypto on Robinhood?

Robinhood is an online no-commission brokerage. A broker is a business that conducts financial transactions on behalf of a customer. Robinhood originally got its start as a stockbroker.

Stockbrokers buy and sell stocks under instruction from their clients, ordinary people. Stockbrokers have existed for as long as stock markets have. In the past, stockbrokers charged a fee called a commission for every transaction, meaning only the wealthy could afford the service. The last few years have seen the rise of a new kind of brokerage: the no-commission brokerage.

No-commission brokerages use advanced software to make a profit from the trades their clients place without directly charging a fee. This allows people to buy stocks without paying a fee and makes it affordable for more people.

As cryptocurrencies have become more popular, more people want to try and profit from their volatility by day trading. However, directly trading crypto, just like with stocks and other securities, comes with significant complexity. For many people, juggling crypto wallets on different blockchains is too complicated. They prefer to use a simple central app to trade all their crypto.

Centralized crypto exchanges like Coinbase already provide this functionality, but do not allow for trading stocks and similar financial products.

You can day trade crypto on Robinhood as easily as you can stocks, ETFs, and options. The only difference is that there are no trading hours for cryptocurrency. You can trade crypto on Robinhood any time of the day or night—there are no restricted trading hours.

Robinhood Day Trading Explained

Day trading crypto or stocks on Robinhood is essentially the same as trading crypto on a centralized exchange like Coinbase or Binance. The difference is that the Robinhood user interface is designed for beginners and is simpler than those of dedicated crypto exchanges designed for professional traders.

The selection of cryptocurrencies that you can trade on Robinhood is currently much smaller than on major crypto exchanges in the United States and around the world. The major coins ether (ETH) and Bitcoin (BTC) are available along with less than a dozen others, including the memecoin Dogecoin (DOGE).

When you day trade crypto on Robinhood there are no transaction fees for the trades. The company makes its revenue from the process of fulfilling your orders—called order flow.

When you buy crypto on the Robinhood app, you can choose whether to use a limit order or a market order.

A limit order indicates that you are only willing to buy at a price you set or less. If the market price does not match what you set in your limit order, it may take a long time for your limit order to be filled.

A market order indicates that you are willing to buy crypto at the current market price. A market order will get filled faster than a limit order, but the exact amount of cryptocurrency you receive may be slightly more or less than you expected. It will depend on how the market price changed between when you submitted the order and when it was filled.

A limit order is one way to avoid overpaying, but it takes longer to fill so it makes you less able to react quickly to price changes.

A market order allows you to react quickly to a changing market but leaves you vulnerable to overpaying for crypto if the price experiences a temporary spike.

How to Day Trade on Robinhood

Now that you know it is possible, The question to answer is how can you day trade crypto on Robinhood. You can use the Robinhood website or smartphone app to do your trading. In either case, you need to create a trading account with Robinhood and fund it with U.S. dollars. To open a new Robinhood account, you will need to provide proof of your identity.

AML and KYC ( anti-money laundering know your customer) regulations require financial institutions to record the identity of all their customers. This information allows government officials to trace the identity of account holders if a crime is committed. AML and KYC regulations are intended to help prevent and investigate major financial crimes.

Financial institutions based in the United States and many other countries require you to provide some form of official identification before you are allowed to use the platform.

Another factor to consider about how you can day trade crypto on Robinhood is your trading strategy. Merely buying and selling based on gut feelings or what other people are doing is a recipe for guaranteed losses.

Before day trading any asset, you should research which proven day trading strategies, such as scalping or range trading, are appropriate for it. Once you have developed a strategy you can safely consider day trading.

Risk of Day Trading on Robinhood

Firstly, it is important to understand that only a few day traders ever make consistent profits. Of the few that profit, most do not make more than they would have if they had held a valuable commodity as its price rose slowly.

Day trading is not a way to get rich quickly. For most people, it is a way to lose a lot of money in the comfort of their homes.

Day trading any commodity on any platform is an inherently high-risk activity. If you misjudge the market you could make a big loss. It is important to develop a day trading strategy that makes sense. It is also important to stick to your strategy and avoid making emotional decisions as crypto prices change rapidly.

Another risk of day trading is that the Robinhood app may become unavailable at a critical time, usually when the market is at its most volatile.

In early 2021 the company was accused of collusion with major players in the financial market by users. This was because thousands of users were prevented from making profitable trades during a period of major volatility of Gamestop (GME) and AMC share prices.

The company initially denied wrongdoing, but U.S. regulators were unconvinced. In July 2021, Robinhood Markets Inc was ordered by the Financial Industry Regulatory Authority (FINRA) to pay $70 million in fines and compensation over outages and for misleading customers.

Whether outages are deliberate or unintentional, periods of high volatility may lead to problems accessing your funds. This issue exists for any centralized trading platform. The only way to avoid it is to use a decentralized trading platform on a public blockchain. Since the blockchain is shared over tens of thousands of independent nodes, the failure of a few poses no problem to access, and it is not possible for anyone to deliberately shut it down.

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Final Thoughts

Robinhood is a zero-commission online stock brokerage. As a result of its rise in popularity, many people wonder “Can you day trade crypto on Robinhood?”. 

Recently Robinhood has begun to offer cryptocurrency trading on its platform. You can day trade several different cryptocurrencies on Robinhood 24 hours a day using the smartphone app. Always remember that day trading is very risky, and most day traders will never make consistent profits. In addition, Robinhood has the power to suspend trading on its platform at any time and has done so in the past.

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Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.