In just three years, Robinhood Financial LLC has exploded. It gained traction as a free stock trading smartphone application (app). At the start of this year, they announced incorporation of bitcoin and ether trading, using free trades as a loss leader to gain customers. The model seems to be working, as the Wall Street Journal is reporting the startup will soon be valued over 5 billion USD.
Robinhood Booms with Crypto
It’s a daring business model. Sell trades to market makers, collect interest on users’ escrowed cash, and essentially give away free trades of stocks and cryptocurrencies. Then, hope a significant number of users opt for deluxe services, such as the ability to borrow or to trade after formal hours for a nominal subscription fee.
News.Bitcoin.com reported two months ago how Cofounder Vlad Tenev explained, “Cryptocurrencies have become the first foray into investing and financial services to a large number of people. Now it’s become more and more clear [that bitcoin is an] investing asset. We will connect to many exchanges, up to a dozen or more, over the next several months. We want to break even on this business, not to profit from it. We view this as an opportunity to expand our customer base and give our customers more access to functionality.”
Within days of its crypto announcement, Robinhood was flooded with requests to the tune of over one million people — a one-third gain in users. By late February of this year, the app had grown to over four million users. “Over the past few weeks,” the company boasted, “we’ve been overwhelmed by the enthusiasm towards Robinhood Crypto and are excited to contribute to the cryptocurrency community in a meaningful way. Together, we reached four million users and well over $ 100 billion in transaction volume on our brokerage platform, leading to over $ 1 billion in commissions saved in equity trades. With the release of Robinhood Crypto, we’re continuing our mission of making the financial system work for everyone, not just the wealthy.”
This week, the Wall Street Journal learned the company is “set to be valued at about $ 5.6 billion in a new funding round, according to people familiar with the matter, a fourfold increase in just one year that reﬂects the stock-trading app’s soaring popularity among millennials.” Investors in the latest round of funding the startup include DST Global, which only a year ago “valued the company at $ 1.3 billion.” According to the Journal, DST is set to throw 350 million USD at the smartphone app company this time around.
The Power of Crypto
The company’s current valuation, three times that of a year ago, gives Robinhood a very good chance at becoming a major player in the future of retail online trading markets. As the Journal details, “The exploding valuation puts Robinhood among the top 15 highest-valued private technology companies in the U.S., representing an ambitious bet by investors that the ﬁrm can capture a sizable piece of the ﬁnancial-trading market.”
Analysts might be smitten with the company due to its user demographic. It’s well known millennials are smartphone literate and centric, and they’re among cryptocurrency’s biggest boosters. And at that age range, many cannot afford the onboarding of traditional brokerage houses, who have also been wary of crypto, positioning the likes of Robinhood as highly forward-looking. The hope is the app will be a popular gateway for the younger set, and as their incomes and savvy grow so will the company.
It is also safe to reason giving more users the chance to dabble in crypto is meaningful in the company’s recent surge. It could potentially prove an appetite well worth trying to meet in the coming years for a variety of retailers. And, of course, commission-free trades are always a crowd pleaser.
Will you use apps like Robinhood? Let us know in the comments!
Images via Pixabay, Robinhood.
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