Robinhoods Crypto Trading Rises, As Global Growth Slows

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NEW YORK (AP) After helping a new generation of investors get into stocks, Robinhood is increasingly doing the same with cryptocurrencies.

Over $ 4 out of $ 10 that Robinhood Markets Inc. generated in the spring came only from clients trading dogecoins, bitcoins and other cryptocurrencies.

Robinhood also said on Wednesday it lost $ 501.7 million, or $ 2.16 per share, against earnings of $ 57.6 million, or 9 cents per share, in the second quarter of last year. Most of the loss is due to accounting changes related to a fundraiser she undertook earlier this year.

The loss was not a surprise after the company had previously given preliminary estimated results for the quarter. The slower growth in the company’s revenue was also expected, it is expected to be more than halved to 131%, from 309% in the first three months of the year and the company again said that revenue would likely drop in the summer compared to the spring.

But the degree of the surge in the importance of crypto to Robinhoods business was striking. Cryptocurrencies accounted for 41% of all Robinhoods revenue of $ 565.3 million in the quarter ended June 30. That’s up from 17% in the first three months of the year and just 3% at the start of last year. Spring marked the first quarter for Robinhood where new clients were more likely to make their first transaction in cryptocurrency rather than in stocks.

Robinhood CEO Vlad Tenev said in a recent interview with The Associated Press that he wants the company to make it easier for the company to trade in any asset that its customers are interested in, and that increasingly means crypto.

They are interested in exploring this new asset class, he said. So, without a doubt, crypto has been very culturally relevant in the first six months of the year.

Tenev also said he sees cryptocurrency companies as competitors of Robinhoods, just like other brokerages. Coinbase, a publicly traded crypto exchange, said it generated $ 1.9 billion in transaction revenue in the second quarter, compared to $ 233 million in crypto-related trading revenue for Robinhoods.

With cryptocurrencies, Robinhood makes money by channeling orders from its clients to market makers. It’s similar to how Robinhood makes money with its clients by trading stocks: it receives payments from Citadel Securities and other large trading companies after sending them past stock purchase orders. by its customers.

Interest in cryptocurrencies increased at the start of the last quarter, leading to a frenzy of trading activity. Bitcoin hit $ 64,829 in April after starting the year under $ 30,000.

Even dogecoin, which fans have tried to help shed its funny cryptocurrency image, has skyrocketed. It rose to 74 cents in May after starting the year at around half a cent. The majority of Robinhood’s crypto-related revenue in the last quarter came from dogecoin, at 62%.

But cryptocurrencies are notoriously volatile, and their prices have continued to fluctuate sharply since reaching those highs. Bitcoin has since fallen back to $ 45,000 and dogecoin has been cut by more than half to around 30 cents.

This could hamper Robinhoods revenue growth in the future. The company said on Wednesday that its revenues would likely fall from the second to the third quarter.

We expect seasonal headwinds and lower business activity across the industry, CFO Jason Warnick said on a conference call following the release of quarterly results.

Trading for brokerage houses is typically most active in the first half of the year, before fading into the second half, he said. Robinhood’s earnings are also better when the markets are volatile and clients trade a lot, and the first two quarters of the year were marked by extreme volatility. In the first quarter, GameStop and other memes stocks hit heights that professional investors called irrational, and cryptocurrencies had their own pop in the second quarter.

Concerns about potentially slower growth helped push Robinhood shares down 8% in after-hours trading on Wednesday, after rising 6.7% in the regular session to close at $ 49.80 . Such fluctuations are not new to the young life of the stock.

Shares of Robinhood, based in Menlo Park, Calif., Have hovered between $ 33.25 and $ 85 since they began trading at $ 38 on July 29.

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