Trading app Robinhood has exploded in revenue this year. In the second quarter of 2021, half of its revenue came from cryptocurrency trading to reach a whopping $565 million. Dogecoin (DOGE) in particular has been responsible for this significant increase.
Cryptocurrency trading boosts Robinhood’s revenue
Unsurprisingly, the good economic health of digital assets during the first part of 2021 has allowed some market players to increase their revenue significantly. Robinhood is one such player, having benefited in particular from the increase in the number of transactions.
While it was targeting revenue in the range of $546 million to $574 million, the trading app achieved its goals by generating $565 million during the second quarter of the year (Q2 2021) for its entire business. That’s a 131% increase over the same period in 2020 ($244 million).
More interestingly, half of that $565 million came from cryptocurrency trading alone, or $233 million, up from 17% to 51% compared to the first quarter of 2021 (Q1 2021). To get an idea of the order of magnitude, revenue from traditional equity trading activity is “only” $165 million in Q2 2021.
Another important fact is that the number of active users has more than doubled in one year, from 10.2 million to 21.3 million, an increase of 130% still between Q2 2020 and Q2 2021.
Dogecoin (DOGE), the main source of Robinhood’s revenue
However, while the reported numbers are good, cryptocurrency trading at Robinhood doesn’t seem to be very diversified. In fact, DOGE is part of the reason why this digital asset trading business has grown significantly.
Indeed, trading in this crypto-currency alone accounts for 62% of all crypto-asset transactions at Robinhood.
Beyond the raw numbers, the reliance on the canine cryptocurrency isn’t going to extinguish the rumor that Robinhood is the biggest whale on the DOGE. As such, it’s possible that its very large capitalization and Robinhood’s increased revenue may be partly related.
Whether this rumor is true or not, one wonders what would happen to Robinhood once the DOGE mania is over. And that’s exactly what worries about the company’s future.
Robinhood’s revenue is expected to decline in the near future
On the one hand, despite the good results of Q2 2021, Robinhood is far from being profitable. Indeed, losses amount to $464 million for the same period, for expenses that are, a priori, not related to cryptocurrency trading.
Above all, on the other hand, Robinhood announced to suffer the fall of the price of digital assets last spring. This fall was notably materialized by a decrease in the number of transactions.
As a result, the third quarter (Q3 2021) revenue will not be as good as Q2 2021. The announcement immediately sent Robinhood’s share price down on Wall Street, although its market capitalization remains very high at around $41 billion.
So we’ll have to keep an eye on the trading app’s future numbers to see if it can last and compete with giants like Coinbase, Binance or Kraken in the long run, at least in the cryptocurrency space.