There are many valid reasons for purchasing and holding Bitcoin and other crypto on a service like PayPal, Square, or Robinhood. While it may not be right for you, please recognize the validity in the following arguments for doing so:
Difficult Learning Curve
Owning crypto is a complicated business. The learning curve required to own crypto is high. I remember looking at Bitcoin back in 2010 and spending a few hours trying to figure out a way to mine Bitcoin. Even with a light computer science background, I was unable to successfully do so, and ended up making Magic the Gathering Online bots instead. I do wish I had spent a few more hours or days or even weeks figuring out how to mine Bitcoin, but I didn't, so I became involved much later. I am still happy with my outcome.
Nonetheless, my point stands: while it has become easier to mine, buy, and store crypto, it is still a high learning curve and requires substantial research in order to become a part of the community.
Services like PayPal, Square, and Robinhood are far easier for everyone to understand. Most people have exposure to PayPal or Square. Many have experience with Robinhood. The additional learning required to invest in crypto is minimal.
The more of a learning curve that is required, the fewer people will become part of the community.
Not Owning Keys does not Mean you do not Own the Bitcoin.
I will preface this section by saying I am a lawyer (but not yours, and probably not in your state).
One of the most common sayings in the subreddit is that if you don't hold the keys, you don't own the Bitcoin. While this may be true from a purely computer-science perspective, it is not true from a legal perspective.
When you hold crypto on an exchange or with a service like Robinhood, Square or PayPal, you own title to the Bitcoin (you could have "bailed" it to the exchange/service, or alternatively it is being held by the exchange/service on your behalf), and if the exchange or service makes some mistake, you have legal recourse against the exchange or service. In other words, you can sue to get damages from them for their mistake.
The ability to file a lawsuit against them only has value if the exchange/service has assets you would be able to seize. So, this means that a better bailee would not only hold crypto assets and would have substantial other assets that you could seize if you won the lawsuit. In other words, services like CoinBase or BitFinex, whose sole business is crypto, could lose all their assets in the event of a bad security breach, or in the event of theft. This has been seen before with MTGOX, and everyone who stored any crypto on MTGOX was left pretty much SoL.
Again, this brings me back to PayPal and Robinhood. These two companies have substantial assets and revenue streams primarily from sources other than crypto. So, if they get hacked and lose all of their crypto, there is still likely going to be recourse against these companies.
While dealing with the companies themselves may be a pain in the ass, there is still recourse in the courts if in no other way.
Responsibility of Maintaining Keys and Wallets
A common recurring theme in the news of the crypto world is lost Bitcoin due to lost keys. Maintaining your keys is a large responsibility, and one that can easily result in losing the Bitcoin forever.
Over several years, I have gifted family members nominal amounts of Bitcoin. Recently these nominal amounts have grown substantially in value. One of my siblings that I gifted some Bitcoin to recently explained to me that they had lost the keys (they had misplaced the seed phrase). They wanted to know if there was any way to get the Bitcoin back without the keys.
Unfortunately, due to the security built into Bitcoin, there really is no effective way to get back the lost Bitcoin.
Maintaining your own keys is something you have to be aware of and on top of. If you mess up in even a small way, you can lose all of your Bitcoin.
On the other hand, if you use a service like PayPal or Robinhood or Square to maintain the crypto for you, even if they do screw up, you have recourse against them.
Wrench Attack Protection
There are also other advantages from holding your crypto on these services. Specifically, it adds additional, multiple layers of protection against "wrench attacks." Wrench attacks are when someone learns you have crypto so they come over to your house and "hit you with a wrench" (physical violence) until you give them your crypto. If you hold your own keys, this transfer is instant and irreversible.
By holding your crypto on PayPal or Robinhood, you ensure substantial delay between your crypto being sold and the funds being available. When you sell your crypto on Robinhood (I have no experience with PayPal), for example, it takes typically 3-5 business days (or more) for the funds to clear and to be able to withdraw them to your bank account.
Then, once your funds are available to withdraw, you withdraw them to your bank account (typically 3-5 more business days).
Then, once the funds hit your bank account, you must either go into the bank or write a check or have some other way of getting the funds to the attacker.
In other words, the substantial delays built into holding your crypto on a service like PayPal or Robinhood act as a lengthy buffer of safety when there will likely be chances to act and protect yourself and (secondarily) your assets.
In stark contrast, if you keep your crypto on a hardware or software wallet, it can be taken from you in mere seconds, and there is absolutely no opportunity to save it or get it back.
Wrench attacks do happen, and storing your crypto on a service like Robinhood or PayPal has its value in protecting you and your crypto and giving you recourse against a company that has other assets that are seizeable.
Managing your own Crypto may not be for Everyone
Certainly holding your own keys is great and has its advantages, but it also has its own risks.
It may be you are willing to take all of the risk yourself. Myself, I like to spread the risk around so that it isn't all on me. I am not perfect and can make mistakes. I don't want a single mistake to cost me all of my crypto holdings.
It is fine to carry crypto and Bitcoin balances in different places, including having some on PayPal or Robinhood and having other holdings on a hardware or software wallet.
So, there it is, the case for storing crypto on a service like PayPal, Square, or Robinhood.
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