Robinhood said it anticipates retail trading is slowing down in the third quarter of 2021 relative to the second quarter, especially in cryptocurrencies. Crypto trading accounts for about 17% of Robinhood’s revenue.
Popular stock trading app Robinhood warned that potential trading revenue will be lower and new clients as the boom in retail investing starts to slow down. It said in an amended prospectus released Monday, as Robinhood is expected to go public next week.
“We expect our revenue for the three months ending September 30, 2021, to be lower, as compared to the three months ended June 30, 2021, as a result of decreased levels of trading activity relative to the record highs in trading activity, particularly in cryptocurrencies, during the three months ended June 30, 2021, and expected seasonality,” cited in a Monday release.
Robinhood offers equity, cryptocurrency, options trading, and cash management accounts, hence, it benefits from its clients’ more speculative trading practices. Options trading accounts for about 38% of revenue, while crypto is 17% of revenue.
With the price of Bitcoin below $30,000, a stagnation in options and trading on crypto could hurt Robinhood’s growth as it heads into one of the biggest public debuts of the year.
Also, as Robinhood said, it anticipates the growth rate of new clients will be lower in the third quarter of 2021, compared to the second quarter, “due to the exceptionally strong interest in trading, particularly in cryptocurrencies, we experienced in the three months ended June 30, 2021, and seasonality in overall trading activities.”
“We experienced strong growth in new customers during the first six months of 2021,” said the release. “We do not know whether, over the long term, cohorts comprised of these new customers will have the same characteristics as our prior cohorts. To the extent these new customers do not grow their cumulative net deposits or trading frequency on our platform to the same extent as new customers that joined in prior periods, our ability to expand and grow our relationship with these customers will be impacted.”
Robinhood expects its app to have 22.5 million funded accounts as of the second quarter, up from 18 million total as of the first quarter of 2021.
As reported before, cryptocurrencies are suffering a two-month correction period following a series of negative news. By the crypto market data provider CryptoCompare, trading volumes at the largest cryptocurrency exchanges, such as Coinbase, Binance, Kraken, and Bitstamp, fell in June by over 40% because of lower prices and lower volatility.