By Niket Nishant and Manya Saini
(Reuters) -Robinhood has cemented its foothold in the crypto trading market as its commission-free model attracts price-conscious customers, analysts said, strengthening its position as a rival to digital asset-focused exchanges such as Coinbase.
Robinhood reported an eight-fold jump in transaction-based revenue from crypto trading for the fourth quarter. The company’s stock rose nearly 14% in early trading on Thursday, hitting its highest since 2021, and added about $6 billion to the company’s market value.
The competition for crypto traders is heating up at a time when animal spirits sweep over the sector, fueled by President Donald Trump’s return to the White House.
His pledge to make the U.S. the “crypto capital of the planet” propelled bitcoin past $100,000 for the first time in the fourth quarter of 2024.
“Robinhood is our best idea for 2025. We expect continued momentum in crypto prices, leading to record trading volumes,” analysts at Bernstein said.
While the company currently offers trading in fewer tokens than Coinbase, it has been steadily gaining market share and could be boosted further under a crypto-friendly Securities and Exchange Commission, they wrote last month.
Robinhood blew past Wall Street expectations for quarterly earnings on Wednesday.
“Trading volumes in equities, options and crypto surged in the fourth quarter, which is a sign that retail traders have confidence in all risk markets across the board,” said Paul Marino, Chief Revenue Officer at Themes ETFs.
“Its hard to predict when the transaction revenue growth will end, but perhaps the long historical investment norm of buy and hold has retired with the baby boomers,” Marino added.
STEEP CLIMB
While growth at Robinhood has been strong, outmaneuvering crypto native exchanges such as Coinbase could be an uphill task.
“Coinbase, Kraken and Binance serve a more crypto-focused consumer. (They) also appear in far more jurisdictions,” said Kadan Stadelmann, Chief Technology Officer at decentralized crypto exchange Komodo Platform.
Coinbase currently lists over 200 tokens, while Robinhood has around 22 on its platform, according to Bernstein.
Trevor Koverko, co-founder of data management platform Sapien.io, also said it might be difficult to compete head-on with native exchanges that are “purpose-built for crypto”.
However, Robinhood is no stranger to disrupting markets, having pioneered a commission-free trading model in 2013 that shook up an industry long dominated by the likes of Vanguard, Charles Schwab and Fidelity Investments.
A decade on, it is also expanding to cater to more seasoned investors and capture market share from incumbents.
“The fact that Robinhood had such a surge in revenues across its entire platform is more than just an appetite for risk in the marketplace – its also a testament to the adoption of its platform and the fact that the next generation of traders prefer what Robinhood is offering versus competitors,” Marino said.
Coinbase is scheduled to report its results later on Thursday. A spokesperson for the company did not immediately respond to a request for comment.
(Reporting by Niket Nishant and Manya Saini in Bengaluru; Editing by Krishna Chandra Eluri)
