The stock-trading app Robinhood restricted cryptocurrency trades on Friday, citing “extraordinary market conditions” in a statement published by Newsweek. The move came as a group of self-organized small-dollar traders tried to make strategic purchases of the cryptocurrency Dogecoin, following its success with stocks in GameStop and other securities. While some are questioning the legality of these collective trading strategies, many are also questioning the legality of Robinhood’s restrictions.
Robinhood is responding to an unprecedented level of use by social media users, stemming from trading strategies outlined on the Reddit forum r/WallStreetBets. The restrictions on cryptocurrency were particularly surprising to many users since the decentralized currencies are meant to be easier to trade. Users shared screenshots of their Robinhood apps saying that instant deposits were “temporarily unavailable for crypto purchases.”
“This means you won’t be able to buy crypto with funds from a deposit until it settles (which can take up to five business days to complete),” the message went on. Robinhood’s public statement said: “Due to extraordinary market conditions, we’ve temporarily turned off Instant buying power for crypto. Customers can still use settled funds to buy crypto. We’ll keep monitoring market conditions and communicating with our customers.”
Dogecoin is a novelty cryptocurrency created in 2013, based on the then-ubiquitous meme of a Shiba Inu wearing a suspicious expression. Many believed that this would be the next target for a surge in value by r/WallStreetBets, but Robinhood’s intervention may have slowed that process somewhat.
Dogecoin still surged in value by over 800 percent on Friday, though Robinhood’s restrictions may have prevented some users from getting in on the action. Some also attributed this surge to Tesla and SpaceX founder Elon Musk, who put the hashtag “Bitcoin” in his Twitter bio a day earlier. Many readers take Bitcoin as a shorthand for all cryptocurrencies, including Dogecoin.
Traders used Reddit and other social media outlets to hurl complaints at Robinhood and to share alternative means of trading with each other. One person wrote: “They’re doing all they can to slow us down,” and others accused the platform of “changing the rules” just because the market was enriching the wrong people.
“We’ll continue to monitor the situation and may make adjustments as needed. To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to,” Robinhood said. We stand in support of our customers and the freedom of retail investors to shape their own financial future. Democratizing finance has been our guiding star since our earliest days. We will continue to build products that give more people — not fewer — access to our financial system. We’ll keep monitoring market conditions as we look to restore full trading for these securities.”