Cryptocurrency trading slump drags down Robinhood revenues

Robinhood confirmed indicators that its once-booming throng of retail investors are cooling to the net brokerage, reporting that its individual progress plateaued and cryptocurrency shopping for and promoting stalled inside the remaining quarter.

Although analysts had predicted a slowdown in shopping for and promoting volumes, the sharp drop in crypto shopping for and promoting was unexpectedly excessive, with transaction revenues from the dangerous asset class falling 78 per cent, from $233m inside the second quarter to $51m inside the third.

The drop-off in crypto shopping for and promoting dragged down Robinhood’s basic earnings per individual by 42 per cent, serving to ship its shares down as lots as 10 per cent in after-hours shopping for and promoting, in response to FactSet data. Transaction revenues dropped 41 per cent, from $451m inside the second quarter to $267m inside the third.

Vlad Tenev, Robinhood chief govt and co-founder, acknowledged the company had used the quarter to develop new products like crypto wallets that may perform the premise for future progress. “We think about that Robinhood is popping into most likely probably the most trusted and intuitive platform for retail and crypto merchants,” Tenev acknowledged.

Robinhood went public in July in an offering touted as part of the meme stock revolution that was democratising finance by bringing a whole lot of hundreds of current retail merchants into most people markets and cryptocurrencies.

The group estimated that half of all new brokerage accounts opened from 2016 to 2021 had been on its platform, and half of its private 22.4m funded accounts opened since 2015 had been first-time merchants. Monday evening’s drop in Robinhood shares took them underneath their IPO price of $38.

Month-to-month energetic prospects on the platform fell from 21.3m to 18.9m over the previous quarter. The brokerage acknowledged the decline in crypto train moreover led to “considerably fewer” new accounts, along with a drop in entire funded accounts on the platform.

Funded accounts fell from 22.5m to 22.4m and new prospects opened merely 660,000 accounts, down from 5m inside the second quarter. The seller moreover cautioned that headwinds will almost definitely persist into the fourth quarter.

Although summer time season months are traditionally slower for retail seller sellers, Robinhood’s outcomes underperformed additional typical players corresponding to Charles Schwab, in response to Devin Ryan, director of financial experience evaluation at JPMorgan.

Brokerages like Schwab “are nonetheless seeing sturdy metrics of engagement corresponding to web new asset progress, which stays very healthful,” Ryan acknowledged.

Robinhood added crypto “wallets” to the platform earlier this month, a switch that locations it in direct opponents with additional established digital foreign exchange venues corresponding to Coinbase.

Whatever the slowdown, Robinhood has grown rapidly over the earlier yr. Cryptocurrency transaction revenues had been nonetheless up over 800 per cent from the similar quarter remaining yr.

“The company had telegraphed the tone of the quarter pretty successfully with second-quarter outcomes,” Ryan acknowledged. “The question is: are we returning to a additional common stage of train after an arguably unsustainable first half of the yr?”