trading is Slowing the boom of 2020 and 2021?
This has been a question on the exchange’s mind since Robinhood released its latest IPO filing. The popular US consumer-focused investment app told investors in the document that it expects revenue to decline in the third quarter compared to its Q2 performance. The company highlighted historically strong crypto volumes over the past quarters as the reason for the decline in its projected revenue.
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Naturally, we have to think about Coinbase.
It would be fair to say that Coinbase and Robinhood are quite bullish about the cryptocurrency market not being bothered by short-term changes in crypto trading volume. For example, Coinbase discussed rising and falling consumer interest in crypto trading in its own IPO filing.
The now-public unicorn lives through Crypto Up and Crypto Down. Decline in consumer interest over the next few months or quarters isn’t a big deal, assuming one holds enough long-term perspective and the crypto-infested future that its fans hope will come to pass.
The boom in crypto demand among US consumers has lifted many boats in recent quarters. Coinbase posted very good results in early 2021 due to the rally in the cryptocurrency price raising retail interest and trading fees. Robinhood also saw an uptick in crypto demand, something that ClearTips discovered here. And Square itself has seen an explosion in crypto revenue.
Certainly, demand for equity interest and options also elevated the fortunes of many consumer fintechs during the COVID-19 savings and investment boom. But crypto was a big part of the revenue. Let’s examine both situations through the lens of the latest from Robinhood.
Robinhood’s Market Note
Robinhood’s latest IPO filing has about 316 mentions of “cryptocurrency”. We will stick to what we consider most important.
As reference, Robinhood shared preliminary Q2 data. If you want to go deeper into the overall statistics we have discussed it here. But following the disclosure of hard numbers, Robinhood had some interesting notes about the current quarter (emphasis ClearTips):
Trading activity was particularly high during the first two months of the 2021 period, returning to higher levels in line with prior periods during the last few weeks of the quarter ended June 30, 2021, and at similar levels in the early part of the third quarter Remained. quarter. We expect our revenue for the three months ended September 30, 2021 to be lower than for the three months ended June 30, 2021, resulting in a decrease in the level of trading activity relative to a record high level of trading activity I have come. especially in cryptocurrencies, during the three months ending June 30, 2021, and the expected season.
And in its discussion of some other performance metrics, funded accounts and the like, Robinhood had this to say (emphasis on ClearTips):
We expect growth rates in these key performance metrics to remain low for the period ended September 30, 2021, as compared to the three months ended June 30, 2021, Because of an exceptionally strong interest in business, especially in cryptocurrencies, we experienced in the three months ending June 30, 2021, and seasonality in overall trading activity.
Falling earnings and slowing KPM growth really aren’t the world’s best set of metrics to shine through when running an IPO. But a quick scan of Robinhood’s 2020 revenue indicates that it’s unlikely Unicorn will be able to post year-over-year growth in the last two quarters of 2021. Still, the period of rapid-fire revenue growth appears to be over. Robinhood has posted top-line expansion every quarter since the fourth quarter of 2019.