Today’s biggest news isn’t Bitcoin, but with cryptocurrency and others trading on the platform at the center of the scandal, this is a wake-up call for investors.
Robinhood stopped trading GameStop and other stocks today and set the internet ablaze with rage. At the same time, it should serve as a reminder for those who use the platform for the crypto market presence of the phrase: “Not your keys, not your bitcoin.”
Robinhood stops trading in selected stocks. Is the crypto service coming next?
The phrase applies to all “coins” in general too, but it is Bitcoin that has been the focus of finance for the past year.
Such crypto assets are secured behind a cryptographic layer. Each wallet is made up of a public key that serves as the address that users use to send and receive assets, while a private key is effectively the password for the account.
The decentralized design enables self-management of assets. However, when users buy and store cryptocurrencies on an exchange, the exchange technically owns the private key for the wallet the assets are in, and hence the term was coined.
Related reading | How Bitcoin and Crypto Exchange KYC could be the next ledger leak
If another entity controls the private key for crypto assets, there is a risk of potential hacks or confiscation. The platform on which the assets are stored also has control over coins that the user owns.
The only way to ensure complete ownership and security of crypto assets is through self-management, preferably in an offline cold store wallet. This isn’t a foolproof solution, and many crypto investors have learned that the hard way, but that’s another story.
This story instead focuses on Robinhood, which offers cryptocurrencies but does not allow them to be removed from the platform in a wallet that the user owns. For example, with Coinbase, users can freely move crypto to any wallet they want.
For Robinhood users who technically don’t own cryptocurrency, there is no such solution at all. 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 retailers are now experiencing, Robinhood isn’t the free market they thought it was, and they have had the opportunity to buy shares in GameStop and other stocks in the context of a much bigger controversy with Reddit, the Melvin hedge fund Capital and many others were restricted to other players.
Robinhood can restrict the buying or selling of Bitcoin and other cryptocurrencies that are offered in the trading app at any time. The company has already shown that it is ready to bend if the required powers call for it, and that thousands or even millions of investors may not have access to cryptocurrencies.
Related reading | Centralized Wealth: The Downside of Institutional Buying Bitcoin
Granted, this is a worst-case scenario that is difficult to imagine, but anything is possible when it comes to the elite desperately trying to maintain control that they have had for a long time and who are now losing thanks to technologies like Bitcoin .
Those with crypto on Robinhood may want to consider selling and taking the capital to buy actual digital assets that they can hold for themselves.
Featured image from Deposit Photos, Charts from TradingView.com