Zero commission trading platform Robinhood is preparing to challenge Coinbase as the de facto leader of the cryptocurrency trading market. Coinbase is the number one exchange to trade digital coins in America while Robinhood has disrupted the traditional equity trading industry with its zero commission trading fee feature.
The two market leaders could be headed for a competitive battle. Coinbase has been criticized for imposing a high transaction fee on users while Robinhood has no fee for trading equity or digital coins.
Robinhood Entering Cryptocurrency Market
Robinhood announced the launch of its cryptocurrency trading platform in January 2018, and it became operational from February 2018. Within a week of operations, it had more than 500,000 applications waiting to be approved. Robinhood co-founder Vlad Tenev recently said that due to the companies zero commission trading model, it hardly makes any money. He added the company is not looking for profits because the crypto trading market is underserved and existing exchanges are arm-twisting their customers to extract high transaction fees.
Searching for a Crypto Engineer
According to a job listing, the Menlo Park-based company is hiring individuals for the position of Crypto Engineer. The description explains that the person will responsible for, “Building our new functionality for our crypto product, like adding new currencies or providing wallet functionality.” This could signal the company’s plans to launch a fully-functional cryptocurrency wallet.
The advertisement goes on to mention that the zero commission trading platform has over four million customers. This signifies the significant growth of the company founded only in 2013. Critics had formerly questioned its business model during its launch, with some even completely writing off the company.
Robinhood could become a potential rival to Coinbase. It is also in discussion with regulators to apply for a banking license as it seeks to offer more traditional financial services. It is clear that the company wants to become a platform which offers banking services, trading in equity and futures and cryptocurrencies.
Taking Tips from the Ansoff Matrix
The Ansoff matrix is a strategic planning tool used by companies to grow and reach scale. It was developed by Igor Ansoff and published in a research paper in 1957. He created a four cross matrix describing options for companies to grow. It was based on two major factors, market and product or service. Robinhood is using all four concepts in the Ansoff matrix. The first concept is market penetration which means selling more of your existing service to existing customers.
Robinhood began as a zero trading platform for equities but has now grown into a full-fledged trading exchange offering multiple products. It is also focused on the second concept of the Ansoff matrix. Called ‘market development’, it refers to a company launching its services into newer markets or geographies.
The company has already said that it will expand globally as and when it gets the green light from respective regulators.
Robinhood knows that most equity traders are also beginning to trade cryptocurrencies. Hence, offering them a crypto trading platform is the best way to get more business from existing customers with a new product. This is the third concept in the matrix called as ‘product development’. The final concept is diversifying into non-traditional markets with newer products. The crypto industry was uncharted territory for Robinhood, and the products had also never been offered before by the platform.