Robinhood Lures Investors with Cash Bonus as Stimulus Checks Loom

Robinhood is offering traders up to 5% bonus on new deposits as stimulus checks set to go out

With the next round of stimulus checks a few days away from being delivered, online brokers anticipate their retail clients may funnel a good chunk of that money into their stock trading accounts.

Among them was a no-fee app, Robinhood Markets which is offering eligible traders up to 5% bonus for their new deposits. Under the ‘Robinhood Cash Rewards’ program, the broker will match 5% of traders’ next top-up, with a credit of up to $250 over the next two weeks.

The cash value of the additional credits may not be withdrawn for 60 days after the deposit bonus is awarded, Robinhood explains.

This promotion comes as industry surveys show that Main Street investors will plough a large chunk of Joe Biden’s coronavirus relief package directly into equities. Additionally, they expect the new liquidity could provide a boost for penny stocks embraced by individual investors active in online social media forums, such as Reddit’s WallStreetBets.

Further, European rules forbid bonuses and other incentives, whether monetary or non-monetary, that may have encouraged overtrading in recent years.

The power of these groups, while forcing many platforms to abruptly restrict trading in the heavily shorted stocks, has caught the attention of retail brokers and Reddit crowds with a whole new segment of potential clients.

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Earlier this month, Finance Magnates discussed the phenomenon Michael Walker, Managing Director at BlackBull Markets and Alexander Tsikhilov, Co-Founder of Admiral Markets.

Robinhood Grilled over Investment Gamification

Robinhood said its clients base has grown rapidly in 2021, having added six million funded accounts to its cryptocurrency service alone. According to data from SimilarWeb, Robinhood’s app was downloaded more than 3 million times last month, which was a record for any broker.

The Silicon Valley startup, mostly used by millennials to trade stocks and cryptocurrency, said the crypto division averaged 200,000 new customers in 2020 and peaked at 401,000 in a single month. However, the startup has not revealed the total customer count since it reported 13 million users in May 2020.

Nevertheless, Robinhood faces regulatory investigations on multiple fronts, including alleged failures to protect inexperienced investors while aggressively promoting its products to them.

The fintech unicorn, which has been credited with helping popularize trading among millennials, revealed it was being sued by the family of a 20-year-old student, who committed suicide last year thinking he had incurred losses of over $700,000 on his Robinhood account.

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