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Robinhood warns of a slowdown ahead

August 19, 2021, 8:26 PM UTC

Robinhood has signaled that mom-and-pop investors may be rethinking their passion for trading.

Over the past year, the upstart brokerage has been one of the biggest beneficiaries of the gobs of day traders, Redditors, and crypto fans who have stampeded into the financial markets. And Robinhood’s first quarterly earnings report as a public company, released Wednesday, shows just how meteoric its expansion has been alongside the retail trading boom of 2021, with total net revenues nearly tripling in the first half versus the same period of 2020.

Perhaps what was most noteworthy about the earnings, though, was the fact that Robinhood has begun to warn that the retail-trading bonanza has shown signs of slowing. From lockdowns to boredom to zero-commission trading, there have been plenty of reasons why retail investors have piled into the stock, option, and crypto markets.

However, with vaccines now readily available and market volatility tapering off, some analysts have indicated they believe retail trading will soon start to level out at a new normal. “Robinhood’s best days are behind it,” New Constructs CEO David Trainer said in a research report ahead of Wednesday’s earnings. “The COVID-19 pandemic boosted the popularity of stock trading among retail investors, as people had more time to trade during the lockdowns of last year. Now, people are going back to their normal lives, spending less time at home and subsequently, less time trading.”

The brokerage business is an inherently volatile one, with ebbs and flows heavily tied to when people are more active in the markets. And Robinhood is no different: Its 2021 results so far have hinged on extreme market events like meme stocks in the first quarter and cryptocurrencies in the second. (Dogecoin alone accounted for 32% of Robinhood’s total second quarter net revenues.)

And just as many of its predecessors, Robinhood is seemingly emphasizing expanding beyond trading into steadier income streams. But for now, it’s warning that “lower revenues and considerably fewer new fund accounts” lie ahead in the third quarter.

Declan Harty
@declanharty
declan.harty@fortune.com

DECENTRALIZED NEWS

Credits 🚀

Vitalik Buterin has joined the board of the Dogecoin Foundation... Facebook is pushing forward into the metaverse with a new app that will allow people to use avatars in meetings... The social network's Novi project is close to coming to market... Crypto company Fireblocks has added former SEC Chairman Jay Clayton to its advisory board... Clayton told the Financial Times that blockchain's adoption among financial infrastructure companies was "close to inevitable"... NFT project Catalog has added Mark Cuban and Peter Thiel's 1confirmation to its list of backers... Coinbase and Mitsubishi UFJ Financial Group are partnering together to build a Japanese crypto exchange... Mortgage lender United Wholesale Mortgage is exploring whether to accept cryptocurrency payments... Banking giant Wells Fargo wants to let its wealthiest clients invest in a passively managed crypto fund... Moody's says banks may have a leg up in the payments battle in China thanks to the digital yuan... Venture capital firm Fintech Collective has raised $250 million, part of which will go toward a new DeFi fund... Presumed future NBA star Cade Cunningham has signed a sponsorship deal with BlockFi that will pay the 19-year-old a signing bonus in Bitcoin.

Debits 🐻

Top U.S. securities regulator Gary Gensler says some DeFi projects may fall under the SEC's oversight... Ethereum creator Vitalik Buterin is skeptical of Jack Dorsey's and Mark Zuckerberg's crypto ambitions... Coinbase has amassed a $4 billion in cash to prepare for a potential "crypto winter"... Liti Capital is pledging at least $5 million to fund an arbitration case against Binance... U.S. central bankers are worried about the lack of transparency and fragility of stablecoins... Mr. White Hat has yet to hand over $141 million worth of crypto assets that were stolen from Poly Network... Dallas Mavericks owner Mark Cuban has less than $500 worth of Dogecoin... SoFi Wealth was sued by the SEC for allegedly failing to disclose conflicts of interests in its own ETFs in 2019... Hackers stole almost $100 million worth of crypto assets from Japanese exchange Liquid... Brian Quintenz, the crypto-friendly official at the CFTC, is stepping down. 

FOMO NO MO

The world's largest crypto exchange wants to take its U.S. business public.

How it does that is becoming a sticky situation, though. Earlier this month, former banking regulator Brian Brooks abruptly resigned from his post as CEO of Binance.US after just a few months on the job, citing "strategic differences". But The New York Times reported Thursday that Brooks' exit in fact came after a funding round he was trying to raise (totaling at least $100 million) fell through, as the investors grew wary of how much control Changpeng Zhao, the head of Binance.com, held over the U.S. business:

Greatpoint entered discussions with Mr. Brooks about a partial investment in Binance.US. The investors initially drew comfort from assurances by Mr. Brooks that Binance.US would be run independently from Binance.com and follow all U.S. regulations. That could eventually include stringent requirements for keeping track of customers' identities, reporting suspicious activity to federal authorities, and making sure that the platform was not being used to commit crimes. 

But with U.S. authorities investigating Binance over money laundering and tax issues, according to a Bloomberg report, and Mr. Zhao's ownership of Binance.US hovering around 90 percent, Greatpoint decided against making an investment.

"We'd have to make an investment decision before all of those issuers were resolved," Mr. Lane said. 

BUBBLE-O-METER

881%

Global cryptocurrency adoption has jumped 881% over the past year and more than 2,300% since the third quarter of 2019, according to a new research from Chainalysis. 

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MEMES AND MUMBLES

Movie theaters be damned. Oscar winning actor Anthony Hopkins—Sir Anthony Hopkins, that is—has a new movie coming out on an NFT platform. 

Filmed during the COVID-19 pandemic, the movie, aptly named "Zero Contact," will debut on Vuele, which purports to be the first-ever viewing and distribution platform "delivering feature films and digital collectible entertainment content as NFTs." The platform will auction off a one-of-one NFT tied to the movie in September, thereby allowing the holder early access to the film and more. Interested? The movie will follow five characters working together to shut down a secret invention that Hopkins' character created. 

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