Robinhood to Introduce Volatility Protection Feature

| Updated
by Babafemi Adebajo · 3 min read
Robinhood to Introduce Volatility Protection Feature
Photo: Depositphotos

When introduced, the new Robinhood feature will help to provide more security for users of the trading app and also absolve the firm of any supervisory failures.

Trading app Robinhood is seeking ways to better protect its users from the volatility associated with cryptocurrencies. According to a Bloomberg report on Tuesday, the trading platform is looking to introduce a feature called ‘price volatility protection’. This feature would change orders based on the fluctuations in the cryptocurrency’s price.

With this feature, Robinhood can sometimes “skip your recurring orders or buy less than your chosen amount” to protect trades from price volatility, but will inform users before taking such action and never purchase more than the amount selected.”

According to Chief Executive Officer of Robinhood, Vlad Tenev, the firm has been working in the background to meet the demands of their cryptocurrency users. He said the firm is working to introduce the functionalities users want safely and securely right from the start.

Why Robinhood Decided to Introduce Volatility Protection Feature?

Rumours about this new functionality first hit the waves after Robinhood temporarily suspended its instant buying option for cryptocurrency purchase in January 2021. The instant deposit feature is a paid option that allows customers to access funds in bank deposits and stock trades instantly.

The suspension of the instant buying option for cryptocurrency through the trading app was necessary at the time. This was because retail investors from Reddit pumped the meme-based coin Dogecoin (DOGE) leading to a price surge of over 900%.

The result was that the coin became one of the top 10 digital assets by market capitalization since 2015. Since then, the coin has been volatile, with a peak price of $0.68 in May.

Robinhood had later reported that up to 17% of its total revenue in the first quarter came from cryptocurrency transactions and 34% of its revenue directly from Dogecoin. This, the firm claimed, was risky for the business as a deterioration in prices of the meme-based coin’s price would also affect the company’s revenue.

Again, the Financial Industry Regulatory Authority has cracked down on the trading app. In June, the regulator announced Robinhood would pay a fine of about $70 million as a penalty. The regulators claimed their investigation revealed the app had caused ‘widespread and significant harm’ to thousands of users.

It also noted that the platform had experienced systemic supervisory failures from as far back as September 2016. Robinhood announced it had agreed in principle with the regulatory body to pay some fines on a “no admit, no deny basis.”

When introduced, the feature will help to provide more security for users of the trading app and also absolve the firm of any supervisory failures.

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Babafemi Adebajo

An experienced writer with practical experience in the fintech industry. When not writing, he spends his time reading, researching or teaching.

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