Final week, Robinhood’s third-quarter earnings fell effectively beneath Wall Avenue estimates, inflicting the corporate’s share value (HOOD) to sink greater than 10%. With crypto buying and selling down 78% from the prior three-month interval, the corporate must lure extra buyers to make use of their platform, particularly for buying and selling cryptocurrency.
Now it is providing free dogecoin (DOGE-USD) together with BTC and ETH by way of a sweepstakes in partnership with fast-food large Burger King, which is owned by Restaurant Manufacturers Worldwide (QSR).
“Crypto is enjoyable. It is also deeply technical. Discovering methods to make it extra accessible, to interrupt down that emotional barrier for folks getting concerned out there, is one thing that we’re continually prioritizing,” Christine Brown, Robinhood Crypto COO, advised Yahoo Finance.
Robinhood’s guess on whether or not a Burger King Whopper can decrease the inhibitions of latest merchants on the fence about crypto may not look like the obvious manifestation of its mission to “democratize finance.” However Brown stated that like dogecoin itself, the sweepstakes might make crypto appear much less intimidating.
“It is a fantastic mission however their enterprise mannequin is about up fully opposite to the mission,” stated Chris Schwarz, affiliate professor of finance on the College of California, Irvine’s Paul Merage College of Enterprise. Based mostly on his analysis, Schwarz identified that Robinhood’s enterprise mannequin over the previous yr has relied on bringing a gradual stream of first-time merchants into the markets.
Added to that, Schwarz just lately co-authored a study for the Journal of Finance that discovered the best way info is displayed within the Robinhood app impacts consumer buying, driving new buyers to herd into property after their costs rise. It might probably in the end result in adverse returns.
“That is an unsustainable enterprise mannequin as a result of, principally, you want the identical group of people that repeatedly consider that one among these occasions it is going to work, or alternatively, you want recent, new folks to come back in and play the sport,” Schwarz advised Yahoo Finance. “And there is most likely a finite variety of folks which are prepared to do this.”
Odds on doge
Via Nov. 21, Robinhood is giving Burger King’s most loyal clients odds to win free cryptocurrency. Burger King clients who join the restaurant’s BK Royal Perks loyalty program have the prospect to win doge, ethereum and bitcoin after making a Burger King buy of $5 or extra.
At 1:1 odds, the sweepstakes is closely stacked in favor of giving contributors free dogecoin whereas prizes final. The possibility of truly successful ether or bitcoin is much decrease, at a respective odds of 1 out of 10,000 and 1 out of 100,000.
Other than its worth including as much as lower than a greenback, this majority dogecoin sweepstakes performs into the income Robinhood already booked from itemizing the asset.
Over the previous yr, the value of Dogecoin spurred extra downloads of Robinhood’s cellular app in keeping with information from Apptobia and Yahoo. In Q2 2021, 62% of Robinhood’s income from crypto got here from clients buying and selling dogecoin, however the firm reported a pointy drop in crypto buying and selling for the third quarter. The platforms utility downloads
In the meantime, many Robinhood clients have moved onto the brand new canine meme-themed shiba inu coin (SHIB-USD), and are demanding the company offer it to trade showed major demand for the company to add a new dog-themed cryptocurrency. The dogecoin by-product gained 82% in worth over the previous week, outpacing dogecoin, with Robinhood capturing not one of the frenzy.
Robinhood’s Q3 income was up 35% to $364.9 million, in comparison with $270 million in Q3 2020. Nevertheless, its drop beneath Wall Avenue estimates of $423.9 million nonetheless has some analysts questioning what revenues from a normalized degree of buying and selling on the platform is meant to appear like.
“The place are folks going to have interaction whether or not it is in equities or crypto? What does that indicate for exercise, new consumer account progress and long term, the story across the improvement of different services,” JMP Securities analyst Devin Ryan advised Yahoo Finance final week after the HOOD earnings name. “Buying and selling is vital as we speak … however the larger image here’s what kind of connectivity do they get launching new merchandise,” Ryan stated.
Whereas Robinhood clients need the platform so as to add new cryptocurrencies like SHIB, the corporate is actively growing new crypto options equivalent to a much-anticipated crypto wallet service along with 24/7 phone support.
“We’re aiming to ship nice new crypto options for purchasers whereas being aware of retaining our platform protected and introducing merchandise that adjust to authorized and regulatory necessities,” Robinhood’s CEO Vlad Tenev advised buyers final week through the firm’s earnings name. Tenev admitted that for crypto “the regulatory panorama is unsure.”
Pablo Batista, 26, helps himself by actively buying and selling shares and cryptocurrencies full time. “They’re form of late to be engaged on [crypto wallets] so I really feel like that’s undoubtedly damage the boldness of their consumer base,” he advised Yahoo Finance.
When the pandemic ended his tenure as a line prepare dinner in a Manhattan restaurant, Batista initially purchased his first cryptocurrencies by way of Robinhood. In February, he switched to utilizing Coinbase and on-line brokerage WeBull as a result of Robinhood did not have a crypto pockets service or the extra technical market information he needed.
“I believe the Robinhood interface is unquestionably newbie pleasant however by way of crypto the principle difficulty was transferring property off the platform,” stated Batista.
However, 31-year-old Mark Mulloy, one other full-time investor who’s been a Robinhood buyer since 2015, stated he is tried a number of different crypto exchanges and inventory brokerage companies like Coinbase, Crypto.com, TD Ameritrade and Constancy, however likes Robinhood finest.
“I got here for the zero-commission buying and selling, I stayed for its user-friendly interface and effectivity for executing orders, and I simply really feel like a variety of these different platforms make you bounce by way of all these additional hoops to withdraw your cash,” Mulloy advised Yahoo Finance.
David Hollerith covers cryptocurrency for Yahoo Finance. Observe him @dshollers.