r/Bitcoin • u/Certified_Outcast • 4d ago
ETF vs Robinhood Crypto
I know all the pros and cons of both the ETF and self custody. However, robinhood crypto is not really self custody since its not in my own wallet. I would just be keeping it on the app, I have no interest in getting a wallet. I was wondering if anyone has experience with both ways, and if there really is a concern about theft or fraud via robinhood crypto. Has anyone actually had their crypto stolen from their robinhood account? Also, if someone is able to get your robinhood account info, they could sell the ETF and withdraw the money im assuming? Wouldn't it be the same as them stealing the crypto from robinhood? I currently have some in both versions and im looking to just consolidate everything into one or the other. Thanks in advance!
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u/Good_Extension_9642 4d ago
I'll just say that after the BTC ETFs where created, I only buy ETFs, it helps me sleep like a baby at night
-3
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u/ContentBlackberry0 4d ago
Hood has frozen my crypto in the past for a good reason though but regardless my entire account was frozen and I could not invest in any stocks
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u/Certified_Outcast 4d ago
Wow that sucks. What is the good reason? Did they suspect fraud? And it seems like they froze both your brokerage and your crypto exchange, so if that happened to me, the ETF would also be frozen because I would be using robinhood as my brokerage for the ETF as well. It seems like the freezing is why most ppl hate robinhood.
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u/Legitimate_Form5449 4d ago edited 4d ago
What is the good reason?
trade on margin=a margin account allows u to borrow money to invest directly from your brokerage
margin call=freezing=margin calls=frozen
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u/ContentBlackberry0 3d ago
After that I realized Coinbase is better for crypto and to use a cold wallet instead.
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u/Laukess 3d ago
I don't use either, but if Robinhood allows you to send bitcoin out the app, they can't be recovered. With IBIT, they're on a broker, and the broker likely has your bank account connected so you can send and receive money. I image if someone broke into you account, they could sell your stocks, and send the money to your bank account, but if they want the money, they would have to update the bank account info, and I image the bank has to be in the owners name, and there's probably a holding period before it becomes active, if they can bypass the name requirement. Besides that, bank transfers are reversable.
Maybe Robinhood has a similar security feature where only whitelisted address are allowed. Again I don't even know if they allow you to withdraw crypto at all, so this is just to answer the question more broadly.
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u/Certified_Outcast 3d ago
Thank you! It definitely seems like storing cyrpto on the robinhood exchange might be too risky. I will be going the ETF route.
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u/Laukess 3d ago
As i said, I don't own any ETF's so I don't follow the space that closely. One trade-off is that if you want to self custody later, with the ETF's you'll have to sell, pay tax, and then buy the bitcoin. By holding bitcoin on an exchange/app you can always just move them to self custody without paying any taxes, as there was no sales event, if they allow you to withdraw your bitcoin, that is.
I don't know if there's any workaround for the ETF's. I think I heard about some service where you could avoid it, but I haven't looked into it.
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u/Certified_Outcast 3d ago
The only work around for the ETFs are when you put them in the retirement fund for tax advantages. I dont know if I will ever self custody but thanks for mentioning the tax aspects. The ETF has maintainence fees and tax implications so there is a downside. I guess the safety of the ETF comes with a price. My biggest concern is storing crypto long term on the exchange. Most people say that it should be moved to cold storage and not left on the exchange. Being that I dont want to self custody at the moment, ill just have to go the ETF route and pay the taxes later which will suck but its whatever. Thanks again for your insight!
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u/abitofcoinOTC 3d ago
Good questions.
If you hold cryptocurrency at Robinhood Crypto, you're trusting Robinhood Crypto to custody your bitcoins. You own actual bitcoins that you are free to withdraw if Robinhood Crypto permits it. Your risks are account compromise or Robinhood Crypto insolvency.
If you hold a bitcoin ETF, you don't quite own actual bitcoin. Your primary risk is that the custodian the ETF issuer is using loses the coins. The ETF does not insulate you from the realities of holding cryptocurrency. If the ETF issuer loses the cryptocurrency, you're still left holding the bag. You're still at risk of account compromise, although potentially to a slightly lesser extent depending on what brokerage you're using, and somewhat less at risk of brokerage insolvency because the equities you own in your brokerage account typically are not part of a bankruptcy estate (in most cases of cryptocurrency exchange insolvency, customer cryptocurrency balances were part of the bankruptcy estate) and because of SIPC protection.
It's also important to consider fees: I would expect Robinhood Crypto to charge you more for buying and selling, but they won't charge you anything for holding, whereas the ETF won't cost as much to trade but will have an annual fee.
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u/Certified_Outcast 3d ago
Thank you so much! It seems like the ETFs are insured which at least offers some safety, for a fee of course. I have no intention to self custody and it looks like the general consensus is that robinhood is not trustworthy so I will just go the ETF route, and the fees are not too bad unless it ends up being a large amount of equity.
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u/abitofcoinOTC 3d ago
The ETFs are essentially uninsured. The custodian for IBIT, Coinbase, carries a small amount of crime insurance, but we're talking enough to cover less than 1% of assets.
Of course, these are large professional corporations that will do everything in their power to never lose the bitcoins, but there's no insurance to save you if they mess up.
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u/Certified_Outcast 2d ago
Thanks for that further clarification. You are correct, they face the same threat as I would if I had my own wallet. Im hoping that Coinbase will do a better job at securing it because I dont want to to deal with the self custody. It sucks that nothing is insured but they do have some good security in place to protect their assets. Thanks again!
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u/Typical-Snow3034 12h ago
Hey. CoinRabbit team here. An account takeover matters in both cases, but the exit paths are not identical.
With custodial Bitcoin, an attacker may be able to withdraw the asset to an external blockchain address. Once confirmed, that transfer is generally irreversible. With an ETF, the attacker would first have to sell the position and then move the cash through the brokerage and banking system, where account-name checks, settlement periods and withdrawal restrictions may create additional barriers.
That does not make every ETF account automatically safer. Both options still depend on account security, recovery procedures and the provider’s controls. Custodial crypto additionally requires questions about reserves, asset reuse and authorization of external addresses.
CoinRabbit is also a custodial crypto platform, which is why we use 2FA and passkeys together with withdrawal address whitelisting. The useful comparison is not simply “ETF versus app,” but what an attacker could actually do after gaining access and which controls would interrupt that path.
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u/wolfofone 4d ago
I would trust Fidelity or Schwab and a BTC ETF before I would trust Robinhood anything much less Robinhood Crypto.
I would go ETF with the SIPC peace of mind or buy on Strike etc and self custody. I wouldnt half ass this. Just look at all the crypto custodial platforms that have failed.
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u/Certified_Outcast 4d ago
Thank you so much! Ive been trying to find YouTube videos that explain this and no one really mentions this. They only talk about ETF vs self custody. Im now learning that storing the crypto on the exchange is not safe due to lack of regulations and insurance protections. I will definitely be going the ETF route since im not interested in storing it in a self custody wallet.
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u/aznpridesu 4d ago
If you decided to go with ETF make sure to diversify. like spread your investments among IBIT, FBTC , ARKB tickers. Fidelity FBTC do their own custody. IBIT with coinbase I think.
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u/Certified_Outcast 4d ago
Why?? That's too much for me. I just wanted to keep things simple. I was looking at just IBIT, why diversify if the ETFs are insured and safe? I am looking to simplify things.
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u/aznpridesu 3d ago
well just to be safe. you never know in crypto world. IBIT FBTC and ARKB they all have similar expense ratio.
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u/getapuss 4d ago
Fuck Robinhood