Cryptocurrency Trading Accounts for 41% of Total Robinhood Revenues

Commissions from cryptocurrency trading accounted for 41% of Robinhood’s total revenue at the close of the second quarter. This is a dramatic increase from only 17% of the platform’s total revenue in the first quarter. This is welcome news, but it also exposes some of Robinhood’s most pressing vulnerabilities.
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More Trading, More Money 

Robinhood reports that more than 60% of its clients traded cryptocurrency during the second quarter. Consequently, the platform collected more commission from the increased transactions. 

In total, Robinhood raked in about $233 million from trade commissions alone. This is a dramatic improvement from the previous year’s revenues of about $5 million. It is worth noting that the second quarter report was Robinhood’s first report as a publicly listed company. 

The company’s shares have registered a lower performance than expected, losing $2.16 per share compared to earlier estimates of 26 cents. However, the company has also outperformance its revenue expectations, registering revenue of $565 million compared to earlier estimates of about $559.5 million. 

Dogecoin is the Most Traded Crypto on Robinhood

Dogecoin is one of the most traded cryptocurrencies on Robinhood. The company reports that 62% of its total trading commissions came from Dogecoin trades. This is also a significant increase from 34% in the first quarter. 

Robinhood has a lot to be thankful for the increase in Dogecoin trades. However, the fact that DOGE trades accounted for more than half of the company’s commissions also highlights an underlying vulnerability: what happens when DOGE loses its popularity with traders? 

Indeed, Dogecoin has been very popular in the recent past. The token has made global headlines repeatedly, and it has caught the attention and praise of Elon Musk, an influential figure in the cryptocurrency market. Dogecoin currently has a market capitalization of about $40.851 billion and averages a $3.95 billion daily trading volume. 

However, DOGE can lose its popularity just as quickly as it gained it. This is not uncommon in the cryptocurrency markets. Robinhood could see a decrease of about half of its second quarter revenues if DOGE becomes less popular – unless it has other popular cryptocurrencies primed to pick up the slack. This is perhaps one of the reasons why the company is cautioning its clients to lower their expectations moving forward. 

Lower Expectations Moving Forward 

While the second quarter has been rewarding, Robinhood is warning its clients to lower their expectations going into the third quarter. “For the three months ended September 30, 2021, we expect seasonal headwinds and lower trading activity across the industry to result in lower revenues and considerably fewer funded accounts than in the previous quarter,” says a company spokesperson.

However, Robinhood’s shares are performing relatively well. The company’s initial public offering (IPO) was $38 per share. Prices fell by 8% at the close of the day, but they are currently going for about $46.9 per share. However, it is worth noting that the shares price fell by 6% after the second quarter report was released. 

Robinhood’s profitability is noteworthy, but the company seems convinced that the recent haul is temporary. Time – and the number of trades on the platform – will tell how the platform will platform moving forward.