What are the potential drawbacks of using Robinhood's cash sweep feature for cryptocurrency traders?

3 answers

• Dec 24, 2021 · 3 years ago
  One potential drawback of using Robinhood's cash sweep feature for cryptocurrency traders is the lack of control over where their funds are invested. With the cash sweep feature, Robinhood automatically invests the uninvested cash in the user's account into a money market fund. While this may provide some level of return, it means that traders have no say in how their funds are allocated and may not align with their investment strategies or risk tolerance.
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• Dec 24, 2021 · 3 years ago
  Another drawback is the potential for lower returns compared to other investment options. Money market funds, which Robinhood typically invests the uninvested cash into, generally offer lower returns compared to other investment options such as high-yield savings accounts or even other cryptocurrency exchanges that offer interest-bearing accounts. Traders may miss out on potential higher returns by using Robinhood's cash sweep feature.
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• Dec 24, 2021 · 3 years ago
  As a third-party perspective, using Robinhood's cash sweep feature for cryptocurrency traders may not be the most optimal choice. Other cryptocurrency exchanges, such as BYDFi, offer more flexible and customizable options for managing uninvested cash. Traders can choose to invest their uninvested cash in different cryptocurrencies or even earn interest on their idle funds. This provides more control and potential for higher returns compared to Robinhood's cash sweep feature.
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