Robinhood CEO Vlad Tenev announced Saturday that crypto is a lynchpin of the retail investment app’s future, and a wallet could be in the works.
“We’ve been doing a lot of work behind the scenes to provide our crypto customers with the functionality that they’ve been asking for,” he said. “We know you want wallets.”
Users can expect a beta release of new crypto features at “some point,” he said, but did not provide any further timeline. It’s a more tentative proclamation than he’s previously made. Back in March, Tenev promised users a crypto wallet “as fast as possible.”
But the company has admitted that crypto trading might be a liability. Dogecoin made up 34% of Robinhood’s first quarter crypto-trading revenue, according to its IPO filing. If interest in the meme coin declines, the company said it could be a risk to the business.
Robinhood is targeting a stock market debut in July, after its plan to go public this month fell through, Bloomberg reported.
The popular investing-app provider, expected to trade on the Nasdaq index, wants to time its initial public offering for when people return from the US Independence Day holiday break next month, Bloomberg said on Tuesday, citing sources.
The decision isn’t final, and Robinhood’s plans are subject to change.
The company confidentially filed for an IPO in March, aiming to make its debut in late June. But its prospectus with the securities’ regulator has not yet been made public. It has been contemplating a listing since as early as 2018.
Popular among retail investors, Robinhood counted more than 13 million users at the end of 2020. It has been credited with helping enable the trading frenzy that sent GameStop stock skyrocketing this year.
The trading platform scored an $11.7 billion valuation at a funding round late last year. But secondary shares have given the company a valuation of as much as $40 billion, according to Bloomberg Intelligence analyst David Ritter.
Three new independent directors joined Robinhood’s board earlier this month. The addition of its first female director, Paula Loop, helps it meet a requirement by underwriter Goldman Sachs that all companies seeking to go public must have at least one diverse board member.
Last month, the company rolled out a service that allows users to buy into IPOs alongside institutions and wealthier investors – including into its own listing.
Robinhood did not immediately respond to Insider’s request for comment on its plans for July.
So far, 2021 in markets has been the year of cryptocurrencies, retail trading and special purpose acquisition companies, or SPACs.
eToro is intimately involved in all three, with the global stocks and crypto trading app set to go public later this year through a $10.4 billion merger with the FinTech Acquisition Corp. V SPAC.
But to many amateur traders and crypto fans, eToro is known as a key supporter of cryptocurrency trading around the world. It made headlines when it added dogecoin to its offering in early May, a move which helped send the meme cryptocurrency soaring around 50% to an all-time high.
Dogecoin has a ‘large, loud, and funny’ community – and Elon Musk
Yoni Assia, the chief executive of eToro, which he cofounded in 2007, told Insider that the real question was why it had taken so long.
“Frankly, because initially dogecoin was invented as a meme or a joke, it felt, to us, not sensible for investment purposes.”
Yet Assia says eToro ultimately decided that the enthusiasm of dogecoin’s fans – not least Tesla boss Elon Musk – meant the coin had a future and was worth adding.
Dogecoin has “one of the largest, loudest and funniest communities in the cryptocurrency industry,” Assia says, adding that “a strong community is a very strong part of every cryptocurrency.”
He adds: “And one member of that community is quite unique on its own. And that’s Elon Musk.”
The Tesla boss has been one of the driving forces behind the boom in dogecoin, bitcoin and cryptocurrencies in general. A tweet from him can send assets soaring or plunging.
“When one member of that community is worth $180 billion, that really changes the dynamics,” Assia says.
eToro has recently added a spate of cryptocurrencies to its platform, on which people in the US and around the world can trade in digital assets.
Does it plan to add dogecoin copycat shiba inu coin, which has recently been making waves? “Unfortunately we do not comment on future listings on eToro,” Assia says, “but I would say that it does seem that shiba has a passionate community around it.”
The trading app tries to educate users on risk
Although dogecoin has a legion of fans, traditional financial analysts and regulators have warned speculators that they could get badly burned.
Trading apps such as Robinhood have come under fire from politicians for the “gamification” of trading and making it easier to bet large amounts on relatively unknown assets, causing many to suffer large losses.
Does Assia worry about this? “I am always concerned about risk management,” he says, “which is why we try to educate our customers.”
When bitcoin and other cryptocurrencies started crashing just over a week ago, eToro “educated our customers about diversification, which is the first and most important element of risk management and managing a portfolio,” Assia says.
Can the retail trading boom continue?
eToro is set to go public later this year through a $10.4 billion merger with serial SPAC-launcher Betsy Cohen’s company, called Fintech Acquisition Corp. V.
The trading app, which is based in Israel, has benefited massively from the boom in retail trading brought on by the pandemic, when low interest rates, government stimulus, and lockdowns combined to push people towards online investing.
eToro’s revenue grew 147% year on year in 2020 to $605 million. In the SPAC deal, the app was given an implied value of $9.6 billion.
A key question for potential investors is whether that growth can continue, justifying the lofty valuation, or whether the retail boom fades as economies reopen.
Assia argues that eToro’s international footing will be key to its expansion. It is predominantly focused on Europe but has customers in more than 100 different countries.
“There is little doubt in my mind that in 10 years, we are going to see several large fintech platforms that are catering globally to retail investors,” he says.
Key to eToro’s plans is a push into the US. It currently offers cryptocurrencies in the US but plans to launch stock trading in the second half of the year.
The app will eventually roll out a full suite of features in the US, including its “CopyTrading” feature in which users can copy successful investors. Assia says the most-copied user gets $150,000 a month just from being imitated on the platform.
“I think the opportunity is very big,” Assia says of eToro’s plans. “Generally we call 2020 the rise of the millennial investor. We weren’t expecting that to accelerate so much in 2021.”
Robinhood said on Tuesday that it would lower its minimum Dogecoin order size to one coin from 10 coins as the meme-based asset’s popularity rises rapidly.
Investors can also place smaller orders of bitcoin and ether, the company said in an update.
“Much happy! Very day! We’ve lowered the minimum order size from 10 $DOGE to 1 $DOGE. You can now build up your doge empire one coin at a time,” Robinhood said in a tweet. “We’ve also lowered the minimum order size for $BTC (0.000001) and $ETH (0.0001) so it’s easier for anybody to invest in crypto.”
Bitcoin’s previous minimum order on the brokerage was 0.0001, while ether’s old minimum was 0.001.
The trading app describes Dogecoin as a “playful take” on cryptocurrencies. “It’s typically used in online communities to ‘tip’ users for content that’s particularly witty or useful. It’s also become a popular cryptocurrency for donating to charities,” Robinhood says of the meme currency.
The digital asset recently hit a peak of $0.41, taking its year-to-date gains to more than 8,700%. But it was trading 21% lower, at $0.30, on Wednesday.
“Robinhood is a repeat offender here,” said Richard Smith, CEO of the Foundation for the Study of Cycles. “They are trying to be all things to all people. They are like Uber in the early days where their attitude is, ‘Who cares if we break a few things as long as we keep growing engagement.'”
Smith added: “Breaking a few things in the taxi business is one thing. Breaking a few things in the highly regulated retail financial services industry is something else.”
Robinhood said that the interruptions to trading were unacceptable but that heightened interest in crypto could continue to cause service interruptions.
Dogecoin was created as a joke in 2013, based on a meme.
“Whilst it has some limited practicality as a way of micro-tipping posters on internet forums, its rise has probably very much due to personal amusement reasons in the internet meme culture, recently spurred on by a playful Elon Musk on Twitter,” said Alex Joshi, a behavioral-finance specialist at Barclays Private Bank.
Joshi said that when the price of an asset rises so spectacularly in a short period, investors get lured in with the prospect of getting rich quick. “When you add in rapidly growing numbers of people buying because they see everyone else buying and making extraordinary returns, speculative herding behaviour really takes off, leading to vast numbers entering the market at extremely high price levels,” he said.
Among the many aftereffects of the GameStop saga earlier this year is an increased interest in Reddit as a source of stock picking advice and investing tips, a recent survey shows.
A survey by Travis Credit Union conducted between February 15 to March 2 among 2,052 Americans revealed that 70% who said they invest look to Reddit for stock tips.
“Today, there’s a lot of positive energy around the stock market as a new generation gets involved through new technology,” said Andy Kerns, Creative Director at Digital Third Coast, which managed the survey for Travis Credit Union.
As for their favorite trading platform, 39% said it was Robinhood, followed by E-Trade at 19%, WeBull at 12%, and Fidelity at 10%.
A majority said they check their accounts daily, while 32% check theirs weekly.
Among all the respondents, 1,275, or 62%, said they have invested only recently. Most said they used what they called “extra spending money,” though one in four surveyed said they invested less than $500.
The rapid rise of retail investors has been a powerful force in the stock market, enabled by a range of factors including commission-free trading, distribution of government stimulus checks, and heightened pandemic boredom as many people continue to work from home.
While more than 57% who were surveyed think the boom in retail trading was “great,” around 10% found it “problematic.”
The retail investing trend hit a fever pitch in January, when an army of retail traders coordinating on Reddit’s Wall Street Bets forum sparred with short-focused hedge funds and pushed their favorite stocks higher.
Robinhood’s controversial decision to limit trading in a handful of volatile stocks isn’t derailing its plans to go public later this year, according to a report from Bloomberg, citing people close to the company.
Robinhood has seen a surge in business over the past year as a new generation of investors flocked to the stock market amid a global pandemic that shut down professional sports leagues for months on end.
The company had more than 13 million users at the end of 2020.
The firm, founded in 2013, is keeping its options open in terms of how it goes public. According to the report, Robinhood is exploring a traditional road show IPO, a direct listing, or a merger with a SPAC.
The company had been planning to hold an IPO around May, Bloomberg said.
Ribbit Capital led the latest capital raise with a $2.4 billion convertible note that will convert into equity at a $30 billion valuation, or a 30% discount to an eventual valuation in a public listing, whichever is lower, Bloomberg reported, citing people with knowledge of the terms.
Going public will give Robinhood flexibility in terms of securing future financing that could be used to increase its cash buffer needed to appease regulators, as well as fund growth initiatives.