Merchants who call
platform home will be more connected to the cryptocurrency universe than ever, after the company rolled out digital wallets to more than two million users. Robinhood’s stock is still down.
After expanding crypto wallets to 1,000 testers earlier this year, Robinhood (ticker: HOOD) announced at the
Conference 2022 in Miami that every eligible person on their waitlist for the product now has one.
Digital wallets allow users to send and receive any of the cryptocurrencies available to trade on Robinhood as well as participate in the wider crypto ecosystem, such as tipping on social media or buying tokens not fungible. Due to regulatory issues, the wallets are not available in Hawaii, Nevada or New York, the group said.
“Our goal is to make Robinhood the most trusted and easy-to-use crypto platform,” Vlad Tenev, the company’s co-founder and CEO, said in a statement.
Robinhood’s move may connect its users to the digital asset ecosystem, but it’s unclear how much that would change the company’s bottom line.
Cryptocurrencies account for less than 20% of Robinhood’s total transaction-based revenue, which topped $264 million in the last quarter of 2021. And while the company’s crypto trading business has recently experienced outsized growth, the segment grew by more than 300% year-over-year in the last quarter – there is reason to believe that this has slowed markedly.
Earlier this week, Christopher Brendler, an analyst at investment bank DA Davidson, estimated that trading volumes on major crypto exchanges
(COIN) in the first three months of 2022 fell by 40% compared to the previous quarter. Its estimate, based on exchange data, is 20% lower than the current consensus.
There is nothing to suggest that the same downward trend would not also be observed at Robinhood. Even more troubling for Robinhood is that Coinbase’s declines are being led by retail investors, a segment in which volumes likely fell 46% from the end of last year, according to the report. Brendler’s estimate. Retail investors are Robinhood’s core business.
The slowdown in retail investor trading – which boomed in early 2021 – will weigh on Robinhood shares, even as the company moves closer to its dream of allowing users to trade 24/7 .
Goldman Sachs analysts downgraded Robinhood to Sell from Neutral, citing “easing retail engagement levels” and a limited path to near-term profitability as likely to limit outperformance next year. The investment bank also cut its price target on the stock to $13, 66% below the company’s initial public offering price.
“Levels of commercial activity in [the first quarter of 2022] have been more mixed, especially on the crypto side, where industry volumes are down more than 40% [from last quarter] due to lower prices and volatility,” said a team of analysts led by Will Nance at Goldman Sachs.
“We also believe that declining retailer engagement, particularly among Robinhood’s lower-end consumer base, could represent further headwinds,” the analysts added. “While the company negotiated much better economics on crypto trading, we see lower crypto volumes from the broader industry more than offsetting this tailwind.”
Robinhood stock fell 7.6% on Friday after falling 3.5% on Thursday.
Write to Jack Denton at [email protected]