Robinhood IPO And What It Means For The Crypto Industry

2021/07/06 08:52:39

If you’ve been following mainstream media, you’ve probably come across Robinhood. The platform saw itself emerge in 2019 when some of the largest brokerages in the United States began offering commission-free trades. Given that Robinhood has been offering user-free trades ever since the introduction of the app in 2015, the platform was lauded for paving the way for other brokerages to offer commission-free trades.

With an increasing millennial investor crowd, online brokerages competed for the demographic by offering the lowest prices while maintaining and improving the services and experience they provided. This allowed Robinhood to disrupt the brokerage industry and become a household name amid the race.

Source: Bloomberg

Robinhood has been welcoming users at an incredible rate, faster than its peers. The company is said to have over 18 million funded accounts as of March this year, a 5.5 million increase from the start of the year, adding almost 50% more customers in the first quarter, a period when the company was put on hold for barring people from trading certain stocks such as GameStop.

Source: Robinhood SEC official filing

A day after incurring the staggering fine from FINRA, Robinhood is expected to go public soon. The company aims to add itself to the NASDAQ stock exchange under the symbol ‘HOOD’ according to its filing with the SEC. While there’s no clear indication of when the leading online broker platform is expected to debut, the company is expected to raise over $100 million by going public.

Considering the promise and the market share dominance Robinhood displays, the IPO puts the stock trading app in a very interesting position. In this article, we’ll be diving into how the IPO will translate to success for Robinhood and what it means for the crypto industry.

Finding Digital Gold in Robinhood’s IPO

On 1st July 2021, Robinhood officially filed its S-1 with the SEC in hopes of raising $100 million in the offering. Following the paperwork, Robinhood will list its shares on the NASDAQ stock exchange. The platform also planned to allocate at least 35% of its share in the IPO toward individual investors.

The leading stock trading app is aiming for an IPO valuation of over $40 billion. Interestingly, the papers showed that the company had over $11.4 billion in cryptocurrency assets until March 31, 2021. Notably, more than half the funded accounts: 9.5 million users, traded close to $90 billion of cryptocurrency on the platform during the first quarter.

Source: Robinhood SEC official filing

About 17% of the total revenue was attributed to crypto transactions in the first quarter. Moreover, about 34% of the $90 billion revenue was driven by Dogecoin. Robinhood also revealed that it welcomed six million new customers on Robinhood Crypto in the first two months of the year. Robinhood aimed to empower its users with the opportunity to buy and sell cryptocurrencies in addition to the diverse range of assets offered through its brokerage.

Robinhood’s crypto offerings currently consist of seven tradable coins: Bitcoin, Bitcoin Cash, Bitcoin SV, Dogecoin, Ethereum, Ethereum Classic, and Litecoin.

So What does the Crypto Future Hold for Robinhood?

Following the success of Dogecoin and cryptocurrencies contributing to Robinhood’s growth, the platform plans to expand its cryptocurrency trading operations and introduce more coins to the platform following its IPO.

Robinhood, as a platform, sees a lot of promise in cryptocurrencies. The CEO shared his plans to make huge investments in the sector and hire a ton of people. Ever since Robinhood’s crypto team has more than quadrupled since the beginning of the year.

Robinhood wants to clarify that cryptocurrencies will be an important part of its overall business and part of its mission to ease access to the masses. Robinhood plans to follow in the footsteps of the American consumer cryptocurrency trading giant Coinbase that skyrocketed and generated strong profits following its IPO. The company projected over $1.8 billion in the first quarter, a 50% increase from its initial $590 million projection in Q4 2020.

Although cryptocurrencies might seem the right choice for Robinhood; however, cryptocurrency traders are hesitant mainly because they’re worried about privacy and centralization. Robinhood might have to move mountains because a majority of crypto trading may not want to trust Robinhood with their assets. Robinhood has a history of halting trades.

Following an 800% spike in DOGE value in January, Robinhood halted instant deposits for crypto purchases, meaning users were limited to buy assets with funds already deposited in their accounts.

Similar cases have been seen amid the GameStop and AMC fever. However, Robinhood’s CEO has acknowledged these issues and has shown his urge to recover, hoping the company can win customers back.

Wrapping Up

Robinhood has shown a lot of promise over the last year. The cryptocurrency market has proven to be a growing revenue driver for the platform as it accounts for a significant percentage of its revenue. Robinhood’s increasing reliance on the cryptocurrency market could bear fruits in the future, increasing access and bringing mass adoption for the crypto industry.

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