Key insights
- Charles Schwab's entry into direct Bitcoin and Ethereum trading to compete with Robinhood is viewed skeptically. The inability to transfer crypto assets off the platform may deter younger, digitally native users who prioritize self-custody. This move may not effectively stem capital flight from Schwab to platforms like Coinbase.
Charles Schwab (SCHW) is rolling out its own crypto trading to compete with Robinhood (HOOD), allowing clients to buy bitcoin (BTC-USD) and ether (ETH-USD).
Scott Melker, the host of "The Wolf of All Streets" podcast, discusses the news in the video above.
"The Daily Wolf with Scott Melker" airs on Yahoo Finance every day at 12:00 p.m. Tune in for your daily dose of all things crypto.
Make sure to also check out Yahoo Finance's new crypto hub to find the latest crypto-related news.
We have this massive story that hit last week that largely went unnoticed because of all the war headlines. Charles Schwab to launch direct Bitcoin Ether trading to compete with Robin Hood. So, I'm on board with the first half of that. I think the second half of that headline is a bit nonsense. When I think of
octogenarian Charles Schwab, that guy's still alive. Chuck Schwab. He's alive. When I think about that guy
buying Bitcoin or trying to appeal to Gen Z and take away Robin Hood's customers, I think about uh this exact meme right here. How do you do, fellow kids? You guys have seen this before. There's no way that Charles Schwab is going to appeal to younger digital native
customers. And let me tell you why.
Charles Schwab is offering direct Bitcoin and Ethereum spot trading here. That is actually a huge signal. This is not ETFs, these are not products. This is actually Bitcoin and Ethereum.
The problem is, if you buy Bitcoin on Charles Schwab, you can't send it anywhere. There's no functionality for actually moving your assets. And everybody knows that the digitally native and Bitcoiners believe in not your keys, not your coins. They believe in self-custody, they believe in being their own bank and holding their own assets.
So the problem that Charles Schwab right has right now is that they're seeing massive capital flight. They have roughly 39 million funded accounts on Charles Schwab. That's a lot. You know how many customers Coinbase has?
100 million plus customers on Coinbase. And right now,
when a Charles Schwab customer or a Morgan Stanley customer or a JP Morgan customer wants to buy actual Bitcoin or Ethereum or any of the other crypto assets, they have to sell something on Charles Schwab,
send that money over to Brian Armstrong or Vlad Tenev or Star at OKX, buy Bitcoin or Ethereum, and that money literally never comes back. Not only do those people never send it back because they go to a platform that they arguably like better or is built specifically for this, but they don't send that money back because they literally can't.
There is no way to send your Bitcoin and Ethereum back to Charles Schwab right now. This is a huge problem for these legacy systems. There is no way for this money to return once it leaves and offering Bitcoin Ethereum in a walled garden is not the solution that they're looking for.
Once again, this is absolutely huge news. I think this is great for their customers, but they are not going to attract new customers by doing this. But when you line this up with the news stories of the past few weeks,
Morgan Stanley launched a Bitcoin spot into ETF into an already crowded Bitcoin spot ETF space. And now they have their 16, 17,000 advisors out selling Bitcoin on the streets and they offered it at 0.14 bips, which is way below Blackrock and the competition, which means they actually do intend to compete in the Bitcoin spot race.
You also had Goldman Sachs last week launching an income income Bitcoin ETF or announcing that they're going to, which is yet another financial project that allow people who want access to Bitcoin to get it in a different wrapper.
So the story here is that every big institution in the world now has a Bitcoin plan. And whether they want to or not, I think they're coming in kicking and screaming. I don't think that octogenarian Charles Schwab is sitting at home playing with defy and has decided he really like needs this Bitcoin thing. I
he probably doesn't even know how to use email yet. Right? And so this is what's being asked by their customers and they're going to have to offer it to those customers.