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Battle of the Exchanges: Robinhood vs. Coinbase
Friday, March 4, 2022 • 4:00 PM EST
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This article was created through qualitative survey data combined with verified spend data for Crypto exchange deposits & withdrawals, find out more about the tool here
As equities trading continues to become easier, some exchanges - namely Robinhood - are turning to crypto. But that pits them against crypto-exclusive incumbents, one of the strongest being Coinbase. To better understand this battle for the crypto dollar, Cardify analyzed publicly proprietary deposit and transaction data for both platforms and surveyed verified Robinhood and Coinbase users to learn their perspectives on the debate.
Comparing the two exchanges, Coinbase shows significantly higher growth as the number of customers joining continues to outpace Robinhood. The platform's growth peaks and valleys are also more widely varying, but the lowest valley for Coinbase still eclipses Robinhood’s highest peak.
A similar trend emerges when looking at deposits. Coinbase saw enormous growth in its number of deposits, for instance May 2021 hitting 10x July 2020 levels. On the other hand, Robinhood saw consistent deposits with very small spikes throughout 2021 most notably in May 2021. Furthermore, Robinhood saw little to no benefit from the crypto bull-run in the 2nd half of 2021, whereas Coinbase had flourished.
The trend is perhaps cemented when layering on new user acquisition. Coinbase is the clear leader, riding peaks and valleys with user acquisition consistently staying higher than Robinhood
When surveying verified Robinhood and Coinbase users, we first asked how long they used their respective platforms. Here, Robinhood has a slight edge: 58.6% of Robinhood users have been on the platform for more than a year compared to only 37.6% of Coinbase users.
As shown, both platforms acquire their crypto investors primarily through word of mouth and social media. Robinhood edges a slight additional win as 17.5% of Robinhood crypto users learned about the crypto product from Robinhood’s trading app. This suggests a strong opportunity for cross-pollination into crypto, an advantage Coinbase currently does not have.
Robinhood also appears easier to use, with 30.3% of users saying it took less effort than expected to set up an account. Only 19.1% of Coinbase users said the same. This further leverages the cross-pollination of a centralized trading app seen in user acquisition channels as users are familiar with the platform.
A similar ease-of-use trend applies when asked about the effort needed to make a crypto purchase. A higher percentage of Robinhood users (38.3%) than Coinbase users (32.7%) said it was very easy to make their first purchase. However, most users on both platforms said it was either very or moderately easy to make their first purchase (73.6% for Robinhood and 71.3% for Coinbase).
As expected of a more specialized crypto exchange, Coinbase provides more in-depth guides on cryptocurrencies, whereas Robinhood’s education focuses on traditional equities and lacks crypto depth. Only a minority (19.7%) of Robinhood users rated it as either above average or excellent, with 19.4% saying it is below average or poor. This compares 44.1% of Coinbase users saying it’s above average or excellent and only 11.3% saying it’s below average or poor.
Finally, Coinbase wins in terms of the holy grail of viral marketing: referrals. When we asked Robinhood and Coinbase users if they would recommend their respective platforms to a friend or family member just starting with crypto, 87.4% said they would recommend Coinbase compared to only 75.2% for Robinhood. Both maintain a majority, but Coinbase’s significant lead in this question suggests that its educational content plays a greater role in recommendations despite Robinhood being rated as easier to use.
Coinbase in the spotlight
Diving into Coinbase specifically, it appears that people are depositing relatively more into Coinbase (or relatively less into Robinhood). Comparing Coinbase deposits as a percentage of Robinhood deposits for the same investors, Coinbase deposits have consistently grown. This indexed data suggests that more users are swapping platforms.
The data shows a similar trend in user base size, with Coinbase users as a percentage of Robinhood users growing steadily since July 2020.
When we asked verified Coinbase users about their preferences, they indicated Coinbase Wallet, Coinbase Earn, and Coinbase Card as the top three features they use on the platform. Coinbase Pro wasn't as widely adopted, despite being a more technically advanced version of Coinbase, enabling more tooling and lower trading costs.
Users who indicated Coinbase was their primary crypto investing platform noted ease of use and comfort with the platform as the two key reasons for their preference.
Robinhood at a glance
Robinhood’s users are more frequently depositing on Crypto specific platforms. As shown by this increase in late 2021 which Robinhood didn’t show quite as much benefit from in indexed deposits. This trend is worrying as some users are seeing a need for more tooling or variety found on alternative crypto specific exchanges.
Perhaps as expected with increasing deposits, crypto users are also a growing percentage of Robinhood’s overall user base. However these Crypto users are potentially creating a leaky bucket for Robinhood as users begin to dive into more types of crypto transactions/financial instruments. When asking users about Robinhood’s options for crypto trading and if they are sufficient, 41.3% of users believed Robinhood is lacking options in the crypto space.
The vast majority of Robinhood users who buy crypto, the vast majority (81.3%) already invested in traditional markets, such as stocks or options. This makes intuitive sense since Robinhood began offering traditional investments far before offering crypto trading.
When asked whether having traditional investments with Robinhood influenced their decision to buy crypto on Robinhood, a large majority (88.0%) said it had at least a slight influence on their decision, with a small majority (54.6%) saying it had a moderate or significant influence on their decision.
For users who indicated Robinhood was their primary platform, ease of use and comfort with the platform were the top two reasons for the preference. This is identical to Coinbase, suggesting that they tend to stick around once someone gets comfortable with a specific platform. One additional note is that 15.1% said its because they already used Robinhood for other investments, and 13.3% cited Robinhood’s fee structure (that is, no fees), two potential benefits Robinhood has over Coinbase.
What people look for in a trading app
While familiarity might drive incremental loyalty, a big question is what draws someone to select a crypto platform in the first place?
When we asked which feature is most important in a trading platform, the first choice was low transaction fees (61.8%) The second was the variety of cryptocurrencies available on the platform (60.9%). The third place was deposit speed (31.5%) followed by the company being US-based or originated (19.2%). These preferences are interesting because Robinhood wins regarding fee structures, but Coinbase has a significantly wider variety of coins available. Given how close the two rankings are, it seems the exchanges could be in dead competition with one another over these two features.
In the case of crypto, the popularity and user base holds more weight as exchanges work on a custodial basis, meaning they are often the ones in possession of your coins. The majority of users (62.6%) also rated the perceived validity of an exchange - marked by the exchange’s popularity and size - as either very important or important to their decision of which platform to use.
Users also indicated a preference for a centralized app that would show all of their investments in one place, including crypto, stocks, options, and other investments. Around one-third (36.8%) said they definitely would prefer this while 32% said they probably would.
The crypto-skeptics weigh in
Of course, not all registered users of platforms invest in crypto. In Robinhood’s case, they may own other investments, and in Coinbase’s case they may have set up an account but not made any purchases. We wanted to better understand what it might take to get them into the crypto markets for those who indicated they do not own crypto..
The primary reason people cited was the ease of platform use (32.2%), and the second (28.7%) was education and resources, suggesting both platforms might want to consider education about crypto itself and how easy the platform is to use.
When asked about all-in-one brokers versus crypto specialists, the majority of people who don’t own crypto (56.1%) said they’d prefer all-in-one. An all-in-one broker would limit the complexity required to manage multiple accounts, as a new user would only require familiarity with one platform.
Similar to crypto owners, people who don’t own crypto also view an exchange as more reputable and trustworthy if it has more users, suggesting a belief in the judgment of the crowd knowing more than the few. In the case of the crypto-skeptics, this group is less likely to know about the custodial tendencies of most platforms, but the network effect still holds strong
When asked directly what platform people would use to start investing in cryptocurrencies, Robinhood eked out a slight lead (52.7%), but the two platforms are more or less tied among those who have heard of both.
What would get more people to buy crypto?
Looking ahead, it seems that people are bullish on crypto: 53.4% say they plan to invest a little or a lot more in crypto in 2022, while 30.6% plan to keep the same level of investment as they did in 2021. A small percentage (16%) say they plan to invest a little or a lot less in crypto this year.
When asked what might entice someone to invest more in crypto this year, the top-cited reason was the return on investment (44.2%). The second was market stability (29.9%), which is an interesting juxtaposition since volatility can often be a source of profit for investors.
Coinbase edged out a win in terms of brand recognition compared to the dueling exchanges, leading to more user acquisition and deposits. Despite being more well-known initially, Robinhood isn’t capturing as many crypto users as Coinbase. This could be due to negative press around Gamestop and AMC, which heavily involved Robinhood, or it could be nothing as Robinhood’s crypto user base continues to grow.
In the end, the fate of Robinhood, Coinbase, and truly all crypto exchanges seems to rest on the future of crypto itself. While many self-styled “crypto bulls” are excited to buy more crypto and see a bright future for cryptocurrency, there are also inklings that people want more stability and opportunity for semi-predictable returns on investment before really investing.