Robinhood drew 34% of crypto income from its “overexposure” to Dogecoin (DOGE)
Commission-free trading platform Robin Hood reveals that he relies heavily on Dogecoin. The company admits that declining demand for the same controversial token could negatively impact its operations.
With a YTD peak of nearly + 15,000%, DOGE’s performance shocked many analysts. However, given that it seems to be driven primarily by sentiment rather than fundamentals, some believe it’s just a descent for Dogecoin from here.
In the first quarter, 34% of Robinhood’s crypto revenue came from Dogecoin.
That was before it really broke.
– Alex Wice (@AWice) July 1, 2021
If so, it could cause problems for Robinhood as he tries to go public.
Dogecoin accounts for a significant portion of Robinhood’s revenue
Robinhood Markets, Inc. filed its Form S1 Registration statement with the Securities and Exchange Commission (SEC) in connection with the IPO.
In doing so, the company disclosed its financial data for the first time. For the year up to December 2020, the total revenue was $ 959 million; this is an increase of 245% from the previous year, to $ 278 million. At the same time, net income was $ 7 million, compared to a loss of $ 107 million for the fiscal year ended December 2019.
Figures for the first quarter of 2021 show a massive increase in revenue, reaching $ 522 million from $ 128 million for the same period the previous year.
Under risk, the form identified a significant portion of its income from Dogecoin trading. The statement said its operations could be “favored” if demand for Dogecoin transactions declined.
“A substantial part of the recent growth in our net income from cryptocurrency transactions is attributable to Dogecoin transactions. If the demand for Dogecoin transactions decreases and is not replaced by a new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and operating results could be affected. negatively.
Robinhood said that Dogecoin trading accounted for 34% of its cryptocurrency trading revenue in the first quarter of 2021, while it only represented 4% in the fourth quarter of 2020.
everything is so stupid pic.twitter.com/WcZkk1C5Xj
– Matt Levine (@matt_levine) July 1, 2021
SEC worries about gamification
Robinhood took off early in the lockdown when younger people, arguably less experienced, turned to trading.
His monthly active users have more than doubled since last year, to 17.7 million in the first quarter of 2021, compared to 8.6 million in the same period last year.
Robinhood’s growing popularity has been noted by authorities who have opposed the “gamification” of trading on the platform.
President of the SEC Gary Gensler spoke about these concerns at a recent House financial services committee. He identified in-game features such as points, rewards, leaderboards, bonuses, and competitions designed to increase engagement.
“Many of these characteristics encourage investors to trade more,” Gensler added, “Some academic studies suggest that more active trades or even daily trades lead to lower returns for the average trader.”
In relation to this, Robin Hood said he intended to make “significant changes to our business model.”
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