With more than $80 billion in assets under management belonging to over 18 million users, the trading app Robinhood plans to go public in one of the hottest IPOs of the year. Surprisingly, investors began correlating Robinhood’s IPO success with Dogecoin (DOGE), the meme-inspired cryptocurrency.
According to Robinhood’s S-1 IPO filing released last week, the company generated almost $30 million in revenue from trading in Dogecoin, making up close to 34% of the entire revenue generated from cryptocurrency trading in the first quarter. What’s more, increasing crypto interest among new and advanced investors have been translating into higher revenue and user growth for trading apps.
Robinhood’s cryptocurrency transactions revenue accounted for 17% of the overall first-quarter revenue, indicating a massive growth from 4% in the prior quarter.
Second Quarter Dogecoin Revenue Will Further Fuel Sentiment
Dogecoin gained significant importance for investors who are interested in Robinhood’s IPO, because the commission-free mobile trading app mentioned the meme cryptocurrency as a risk factor in the online trading app’s IPO filing.
“A substantial portion of the recent growth in our net revenues earned from cryptocurrency transactions is attributable to transactions in Dogecoin. If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition, and results of operations could be adversely affected,” Robinhood warned prospective investors.
Dogecoin revenue is likely to soar sharply for the second quarter, driven by an eye-popping price and volume growth due to the active social media attention surrounding the Shiba Inu-inspired meme token.
According to CoinMarketCap data, Dogecoin’s trading volume jumped by 258% to $866 billion during the second quarter, a massive increase compared to the first quarter trading volume of $243 billion. This means that Robinhood’s second quarter transaction revenue from dogecoin could see sharp growth. However, there is a downside risk for Robinhood in the third quarter, as Dogecoin’s price and trading volume slid considerably since hitting an all time high of $0.70 in May.
Robinhood currently allows trading in seven cryptocurrencies: Bitcoin, Ethereum, Litecoin, Bitcoin Cash, Dogecoin, Bitcoin SV & Ethereum Classic.
Robinhood Business Model and Growth Prospects
Founded in 2013 by Vladimir Tenev and Baiju Bhatt, Robinhood has completely changed the brokerage industry by setting no account minimum and zero-commission trading on stock and ETFs.
“We are not setting any account minimums, which we think unlocks a market of investors who couldn’t do this before,” said Bhatt to CNBC at launch. “We see Robinhood as unlocking the micro investor market.”
Their unique strategy has worked out well for the mobile trading app considering a massive user growth adoption in the past seven years. In keeping with its mission to democratize access to markets, more than 50% of its 18 million users are first-time investors. The company plans to make financial investing more accessible to newcomers and it seeks to set aside close to 35% of its shares for individual investors.
“We’d rather serve many small customers than a few large ones, and, while our competitors strive to go further ‘upmarket,’ we continue to see opportunity in serving those left behind, including underbanked customers, not just in the United States but all over the world,” they said in a letter to shareholders.
Although the app is famed for zero commission on stocks and ETFs, it makes most of the money through payment for order flow and transaction rebates. Moreover, the trading app generates revenue on premium subscriptions for its “Gold” service.
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