Robinhood’s crypto business continues sliding during crypto winter as customers steer clear of trading

Online brokerage Robinhood reported a sharp decline in crypto trading revenue over the last three months of 2022 compared to 2021 as its customers shied away from the platform’s crypto offerings amid the industry’s implosion.

Revenues from transactions tumbled 20%, the company said as part of its fourth-quarter earnings report on Tuesday. Fees collected fell to $39 million in the fourth quarter versus $48 million in the same quarter in the prior year.

Robinhood’s overall revenue rose slightly to $380 million in the latest quarter from $363 million in the same quarter of 2021. Meanwhile, the company’s losses narrowed to $166 million in the latest quarter versus $423 million in the fourth quarter of 2021.

“We’re now starting to see meaningful traction on a number of the products we launched, which gives us confidence they can grow into significant business lines over time,” Vlad Tenev, CEO and co-founder of Robinhood, said in a statement.

Shares for the online brokerage rose 5% to $11 in after-hours trading, following the release of the earnings report.

Robinhood has recently pivoted into the cryptocurrency market, launching a crypto wallet in August 2022. The decrease in revenue from crypto transactions demonstrates the continued struggles of crypto and crypto-adjacent companies during the industry’s recent bear market.

Founded by Stanford University graduates Vlad Tenev and Baiju Bhatt in 2015, Robinhood makes the bulk of its money from high-speed trading firms that pay for the right to execute stock transactions that users submit through the brokerage. 

Early in the pandemic in 2020, Robinhood saw its fortunes skyrocket as millions, especially millennials and Gen Zers, flocked to the app to trade stocks. Because of its accessibility and comparatively low fees, Robinhood also became a hotbed for the trading of memestocks, like GameStop, AMC Entertainment, and Bed Bath & Beyond. (To the memestock traders’ chagrin, Robinhood temporarily paused the buying and selling of these shares in response to the sudden buying frenzy.) 

Building off of its momentum in 2020, the company went public in July 2021, at $38 per share. While its share prices briefly peaked $55, it has mostly declined since the IPO, as legacy brokerages like Vanguard or TD Ameritrade pushed back on the upstart.

Just a month before Robinhood went public, the Financial Industry Regulatory Authority issued the trading platform a $70 million fine in June 2021 for service outages in March 2020. And in August 2022, the New York State Department of Financial Services fined the company’s cryptocurrency division $30 million for “significant 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 the now bankrupt cryptocurrency exchange FTX, reportedly owns approximately 7% million of Robinhood shares. After the earnings release, CNBC reported that the board approved a buy back of his shares.

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