Crypto’s Merry Band Comes Back To Robinhood

One of the biggest names in crypto is bullish on the future of Robinhood HOOD 23.31%

Market. That makes sense. But others may think twice before settling in Sherwood.

The disclosure on Thursday that Sam Bankman-Fried, the 30-year-old billionaire, founder of crypto exchange FTX, bought a 7.6% stake in Robinhood sent shares of the online brokerage firm up spike, up nearly 25% year-to-date on Friday. To be sure, the stock is still down about 40% this year and down nearly 90% from its peak price.

Some traders may think this is a prelude to a takeover, in the style of Elon Musk, or even a merger or alliance with FTX. All indications are, however, that this is a personal and passive investment for Mr. Bankman-Fried.

The nature of the application does not preclude an active role, but it says Mr Bankman-Fried does not currently intend to operate and views it as an “attractive investment”. Robinhood also has a special class of stock for co-founders that gives them voting control of the company, making a drastic takeover a difficult proposition.

For many observers, cryptocurrencies may be in a time of crisis, but for industry leaders and believers, it is a time, as Warren Buffett said, to be greedy when others are. scared.

There aren’t many people – maybe besides Mr. Buffett – who can make a 20% surplus return in a day with their seal of approval on a share. But when it comes to cryptocurrencies, Mr. Bankman-Fried’s amulet has clearly captured the market’s attention.

Robinhood currently trades with a market value of about $9 billion, but has cash resources and the equivalent of about $6 billion — that is, segregated cashless for its customers and deposits at its centers. clearing center. So if you’re optimistic about the future of crypto, Robinhood could look pretty appealing.

It holds a license to offer crypto trading in New York – something FTX US currently does not have, although it recently registered for a New York trust charter – and is a place many non-investors have. may come to start trading cryptocurrency for the first time. It has fully deployed its crypto wallet. Robinhood also recently more than doubled the discount rate it receives from sending crypto orders to trading locations.

Even so, crypto trading revenue grew only 13% sequentially in the first quarter due to a sharp drop in activity levels. However, this suggests that any rally in crypto trading or price could be quite lucrative for Robinhood.

However, for the crypto-skeptic, Robinhood’s road ahead is still long. The company says it needs to increase average revenue per user — at $53 as of the first quarter — by about $30 to help achieve positive adjusted earnings before interest, taxes, depreciation and amortization. at the end of the year, the company said. Trading capabilities not working, non-crypto products to drive that expansion remain a question mark, although things like an expanded stock lending program and customer cash levels spikes have promise.

During these tough times for crypto, it can be smart for believers to choose a leader to follow, especially if they have a long run. But if you don’t expect an early recovery, assessing Robinhood in other dimensions remains challenging.

The markets have been looking increasingly shaky lately: Stocks, bonds, and cryptocurrencies are all falling as investors struggle to manage volatile global financial markets. WSJ’s Caitlin McCabe looks at some of the reasons behind the recent market frenzy. Photo: Spencer Platt / Getty Images

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Edmund DeMarche

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