Fidelity Investments to Challenge Robinhood With Retail Crypto Trading Including Zero Commissions

Fidelity’s Digital Assets subsidiary plans to roll out zero-commission Bitcoin and Ethereum trading through its Fidelity Crypto service.

Fidelity Crypto will enable users to trade crypto with zero commission using the Fidelity Investments App. Custodial and trading services will be offered by Fidelity Digital Assets. In the app, customers can view their traditional and crypto assets side by side.

Fidelity: Watch out Robinhood

Customers interested in the new crypto offering can join the whitelist, where Fidelity will inform them when the product launches in their state. In addition, Fidelity is also launching a crypto educational program.

Fidelity’s zero-commission crypto product is not a novel concept. Crypto exchange Binance extended its zero commission trading worldwide for specific BTC/stablecoin and BTC/fiat trading pairs in July 2022, while Bybit offers 0% fees for spot trading and deposit bonuses.

Established brokerage Robinhood Markets, a key competitor of Fidelity’s new product, has been offering zero-commission trading since the pandemic’s start.

But Robinhood is facing tough times as it seeks to regain its former glory, and Fidelity’s new product could threaten Robinhood’s declining user engagement. While Robinhood’s easy-to-use interface is attractive to beginners, Fidelity offers services that can attract more sophisticated investors.

Robinhood garnered fame by offering zero-commission trading through its slick app which surged in popularity during the pandemic. Its trading volumes soared throughout the meme stock trading frenzy that reached its pinnacle on Jan. 28, 2021, when it had to restrict trading due to unmanageable volumes. Meme stocks are real stocks that gain cult status through narratives propagated on social media. GameStop, the brick-and-mortar video game chain, was one of the meme stocks involved in the frenzy.

Are the Robinhood glory days over?

Robinhood’s second-quarter revenues in 2021 were boosted by adding crypto trades that earned the brokerage $233 million in trading fees. Later, it added four more cryptos, including Dogecoin, and rolled out a crypto wallet.

But with the bull market of 2021 more or less a thing of the past, the brokerage has seen a decline in user engagement. It added 60,000 users in Q3 2022, taking its account tally to 22.9 million, while the number of active users per month fell by 1.8 million to 12.2 million.

Robinhood’s shares rallied 1.5% after its Q3 2022 earnings revealed that it lost $0.20 per share, earning a revenue of $361 million. The loss per share beat analysts’ expectations of $0.31, while the company’s revenue came in $1 million shy of expectations. It also raked in $128 million in interest revenue from annual margin interest rates for its Robinhood Gold subscribers.

Robinhood’s share price is currently up 9.8% to $12.55.

Fidelity rolls out bitcoin in 401(k)

Fidelity ruffled feathers in the U.S. Department of Labor when it announced that it planned to offer the 24,500 companies for which it administers 401(k) plans an opportunity to allocate up to 20% of their 401(k) portfolios to Bitcoin. This came after the DOL issued guidance roughly a month earlier regarding the use of crypto in retirement plans, where it warned that companies offering their customers this option should expect an investigation.

Still, Fidelity has gone ahead with its plans this fall, with 24,500 retirement funds that it administers offering bitcoin allocations. MicroStrategy is the first employer to work on providing this benefit to its employees. Fidelity will charge between 0.75% and 0.9% of the plan’s bitcoin allocation.

Fidelity manages roughly $3 trillion worth of assets through the 401(k) plans it administers.

Another retirement provider, ForUsAll, said that 50 clients started allowing retirement investors to invest in bitcoin and ether roughly two months ago.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.