Robinhood Reminder: Not Your Keys, Not Your Bitcoin
Today’s biggest news isn’t about Bitcoin, but because the cryptocurrency and others trade on the platform at the center of the scandal, it is a wake up call for investors.
Robinhood today halted trading of GameStop shares and other stocks, setting the internet ablaze with anger. At the same time, it should act as a reminder for those who use the platform for crypto market exposure of the phrase: “Not your keys, not your Bitcoin.”
Robinhood Halts Trading On Select Stocks, Is Their Crypto Service Next?
The phrase also widely applies to all “coins,” but it is Bitcoin that has taken center stage in finance over the last year.
Crypto assets like it are secured behind a layer of cryptography. Each wallet consists of a public key acting as the address users utilize to send and receive assets, while a private key is effectively the password to the account.
The decentralized design allows for self-custody of assets. But when users buy cryptocurrencies on an exchange and hold them there, technically the exchange owns the private key to the wallet holding the assets, and thus the phrase was coined.
Related Reading | How Bitcoin And Crypto Exchange KYC Could Be The Next Ledger Leak
When another entity controls the private key to crypto assets, they are at risk of potential hacks or seizure. The platform where the assets are stored also have a layer of control over coins the user themselves actually own.
The only way to ensure complete ownership and safety of crypto assets, is to self custody, preferably in an offline cold storage wallet. This isn’t a fool-proof solution and many crypto investors learned that the hard way, but that’s another story.
This story instead focuses on Robinhood, which offers exposure to cryptocurrencies, yet doesn’t allow them to be moved off the platform in a wallet that the user themselves own. Coinbase, for example, lets users move crypto freely to any wallet they want.
No such solution exists whatsoever for Robinhood users, who technically don’t own any actually cryptocurrency. The Bitcoin they think they have, is just an IOU for BTC.
GameStop shares collapsed when Robinhood stopped trading, leaving only the option to sell | Source: NYSE-GME on TradingView.com
Not Your Keys, Not Your Bitcoin: Move Money To Buy Actual Assets
As retail traders are now experiencing, Robinhood isn’t the free market they thought it was, and have had the ability to buy shares of GameStop and other stocks restricted as part of a much larger controversy involving Reddit, hedge fund Melvin Capital, and many other players.
At any given moment, Robinhood could restrict buying or selling Bitcoin and other cryptocurrencies offered on the trading app. The company has already demonstrated that they’re willing to bend when the powers that be demand it, and it could leave potentially thousands or even millions of investors without access to cryptocurrencies.
Related Reading | Centralized Wealth: The Downside To Institutional Bitcoin Buying
Admittedly, that’s a worst-case scenario that would be difficult to imagine happening, but anything is possible when it comes to the elite desperate to maintain the control they’ve long had and are now losing thanks to technologies like Bitcoin.
Those with crypto on Robinhood might want to consider selling and taking the capital to buy actual digital assets they can custody themselves.
Featured image from Deposit Photos, Charts from TradingView.com