Robinhood: Business & Financial Condition ‘Could Be Adversely Affected’ if Demand for DOGE Declines

34% of free-trading app’s revenue came just from DOGE, revealed Robinhood, whose crypto under custody soared by 23x in Q1 as 9.5 million customers traded $88 billion worth cryptocurrencies.

Robinhood revealed that it held about $11.6 billion in cryptocurrency assets under custody as of March 31, 2021, representing an increase of 23x from last year. Other assets under custody include roughly $65 billion in equities, $2 billion in options, and $7.6 billion in cash.

Over 9.5 million customers traded about $88 billion of cryptocurrency on the platform in the quarter first.

Cryptocurrencies were actually one of the primary reasons for the free-trading app’s explosive growth in the first quarter.

Robinhood reported pulling in $522 million of revenue in the first three months of this year, up from $128 million in the same period in 2020, according to the company's S-1 filing.

A big part of this revenue came from retail traders jumping into AMC Entertainment and GameStop (GME) stocks.

“We’re proud to serve the next generation of investors, and it’s painful to see them continually lambasted in media reports,” said co-founders Vlad Tenev and Baiju Bhatt in a statement, defending their customers for driving mania in the markets.

Dogecoin Leads The Way

Besides meme stocks, 17% of transaction-based revenue in the first quarter came from cryptocurrencies, up from a mere 3% in March 2020 and 4% in Q4 of 2020.

The California-based firm further shared that 34% of revenue came from Dogecoin, one of the seven cryptocurrencies available on the platform.

“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.”

A growing share of crypto resulted in the appearance of Tai Mo Shan Ltd., a member of Jump Trading Group, as one of Robinhood’s major market-making counterparties, which reportedly executes Robinhood’s crypto transactions.

Buy-and-Hold Is The Strategy

In comparison to Robinhood’s figures, the leading US-based cryptocurrency exchange Coinbase had $222.7 billion of crypto under custody by the end of the first quarter, 19 times more than Robinhood. Also, in Q1, Coinbase had $1.8 billion revenue while Robinhood’s crypto revenue was just $89 million, about 20 times less than the exchange.

In its filing, the firm revealed the data about its more than 18 million customers while sharing that it increased its headcount from 289 in December 2018 to over 2,100 in March this year.

The median age of customers on its platform was 31, who visited the app on average seven times a day in 2020. Also, most of its customers are primarily buy-and-hold investors, the company said.

From Jan 2015 to March 2021, more than half of their customers said Robinhood was their first brokerage account.

The online brokerage firm is now preparing for an initial public offering (IPO) worth more than $40 billion.

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