Robinhood Reports Return of Retail Traders, Surge in Crypto Trading

Online brokerage Robinhood Markets has reported first-quarter profits that exceeded expectations, driven by strong crypto trading volumes and increased net interest revenue.

Robinhood’s profit for the first quarter stood at $157 million or 18 cents per share, surpassing expectations of 6 cents per share, Reuters reported Wednesday (May 8), citing data from LSEG.

This also marked an improvement from the same period last year, when the company reported a loss of $511 million or 57 cents per share, according to the report.

The surge in profit can be attributed to the company’s thriving crypto trading business, which has been boosted by the approval of the first spot bitcoin exchange-traded funds in the United States earlier this year, the report said. The positive sentiment toward the crypto industry has resulted in increased trading volumes.

However, Robinhood faces challenges in the form of a Wells notice from the Securities and Exchange Commission (SEC), indicating potential enforcement action against the company, per the report. This development raises concerns about the future of Robinhood’s crypto trading arm.

Nevertheless, the company remains confident in its ability to address the SEC’s claims and is prepared to defend itself in any legal battles if necessary, according to the report. Robinhood has emphasized its cautious approach to its crypto business, offering selective coins and avoiding services that have drawn criticism from the SEC.

In addition to its successful crypto business, Robinhood has experienced strong trading activity in equities and options, the report said. Retail traders, encouraged by hopes of a soft landing of the economy, have reentered the market, leading to a 59% increase in transaction-based revenue for the company.

Despite uncertainties surrounding the timing of rate cuts by the Federal Reserve, Robinhood has sustained momentum in the second quarter, per the report.

The company’s net interest revenue rose by 22% to $254 million, benefiting from the Federal Reserve’s policy tightening, which allows companies to earn more from their deposits and bond investments, the report said. Higher interest rates have also enabled Robinhood to charge increased interest on loans provided to traders who borrow against their investments.