Robinhood’s crypto business continues to slide during Crypto Winter as customers shun trading
Online broker Robinhood reported a sharp drop in crypto trading revenue in the last three months of 2022 compared to 2021 as its clients balked at the platform’s crypto offerings amid the industry’s implosion.
Transaction revenue plummeted 20%, the company said Tuesday as part of its fourth-quarter earnings report. Fees collected fell to $39 million in the fourth quarter from $48 million in the same quarter last year.
Robinhood’s total revenue increased slightly in its most recent quarter to $380 million from $363 million in the same quarter of 2021. Meanwhile, the company’s losses narrowed to $166 million in the most recent quarter from $423 million in the fourth quarter of 2021.
“We are now beginning to see significant traction in a number of products that we have launched, which gives us confidence that they can develop into significant businesses over time,” said Vlad Tenev, CEO and co-founder of Robinhood , in a statement.
Shares of the online broker rose 5% to $11 in after-hours trading after the earnings report was released.
Robinhood recently entered the cryptocurrency market and launched a crypto wallet in August 2022. The drop in crypto transaction revenue shows the ongoing struggles of crypto and crypto-related companies during the industry’s recent bear market.
Founded in 2015 by Stanford University graduates Vlad Tenev and Baiju Bhatt, Robinhood makes most of its money from high-speed trading firms that pay for the right to execute stock trades that users submit through the brokerage.
At the start of the pandemic in 2020, Robinhood experienced a rapid resurgence as millions, particularly Millennials and Gen Zers, flocked to the app to trade stocks. Due to its accessibility and comparatively low fees, Robinhood has also become a hotbed for trading memestocks such as GameStop, AMC Entertainment, and Bed Bath & Beyond. (Much to the chagrin of Memostock traders, Robinhood paused buying these stocks in response to the sudden market rage.)
The company built momentum in 2020, going public in July 2021 at $38 per share. While share prices briefly peaked at $55, prices have mostly fallen since the IPO as legacy brokers like Vanguard or TD Ameritrade pushed back the upstart.
Just a month before Robinhood’s IPO, in June 2021, the Financial Industry Regulatory Authority fined the trading platform $70 million for service outages in March 2020. And in August 2022, the New York State Department of Financial Services fined $30 million against the company’s cryptocurrency division for “material violations of the department’s anti-money laundering and cybersecurity regulations,” Adrienne Harris, the department’s superintendent, said in a statement.
Sam Bankman-Fried, the disgraced founder of now-bankrupt cryptocurrency exchange FTX, reportedly owns about a 7% stake in Robinhood. After the results were released, CNBC reported that the board had approved a buyback of its shares.
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