The Wallet That Could Deliver A Wall Street Recovery: Robinhood Pins Hopes on Crypto Wallet As Waiting List Swells

To say that it’s been a busy 2021 for Robinhood is something of an understatement. The online brokerage experienced a period of rapid growth in the wake of the GameStop short squeeze in January, debuted on the Nasdaq in July, and even had time to draw criticism from high-profile Wall Street stalwarts Warren Buffett and Charlie Munger in the meantime. However, after months of tumbling stock value, the market-leading investing app is pinning its hopes on its brand new cryptocurrency wallet to drive a market recovery. 

Robinhood’s crypto wallets promise to allow users to move their cryptocurrencies in and out of their Robinhood app with ease, whilst sending their assets seamlessly across to other wallets and leveraging transfers for purchases or other transactions. 

It’s hoped that the lure of customers consolidating their coins across one account will ensure that Robinhood continues to grow its pool of cryptocurrency investors - a market that the company is heavily dependent on. 

It’s important to note that not all of the stock’s recent downturn is Robinhood’s fault, however. HOOD has found itself the victim of tech stock sell-offs in the wake of high inflation rates and threats to the payment-for-order-flow business model that Robinhood uses by the SEC. 

Despite this, one of the driving forces behind Robinhood’s dwindling value stems from the company’s disappointing Q3 financial results. 

“Robinhood reported Q3 revenue below expectations and expects Q4 income to continue to slow down,” explained Maxim Manturov, head of investment research at Freedom Finance Europe. 

“In Q4, the company's management gave a revenue forecast that would not exceed $325 million against market expectations of $489.21 million. Revenue has been hit very hard by a decline in cryptocurrency transaction revenues of $233 million in Q2 versus $51 million in Q3. Robinhood's share price pressure could also be affected by unlocking 62m shares on October 27 and 49m on November 10,” Manturov added. 

Robinhood’s Dependency on Cryptocurrency

As the company prepared for its IPO in the summer, Robinhood’s S-1 filing with the Securities and Exchange Commission revealed that the platform was heavily dependent on cryptocurrencies, and specifically the meme-token, Dogecoin. 

“A substantial portion of the recent growth in our net revenues earned from cryptocurrency transactions is attributable to transactions in Dogecoin DOGE/USD,” the filing stated. “If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected.”

(Image: Robinhood Engineering)

At the beginning of the year, Robinhood announced that the company had welcomed an average of 3 million new cryptocurrency traders each month in January and February. Across Q1 of 2021, 17% of the company’s total revenue came from fees on cryptocurrency trades, while 34% of that revenue specifically came from DOGE. 

(Image: CoinGecko)

However, despite a blistering first half of 2021, Dogecoin has indeed retraced from its bull run, with trading volumes hit as a result. With this in mind, it’s perhaps unsurprising that the platform has struggled to live up to its optimism from the earlier stages of the year. 

A New Hope for Robinhood’s Cryptocurrency Investors

It’s worth noting that the announcement of Robinhood’s new cryptocurrency wallet has been extremely well received by the app’s users. Following Robinhood’s announcement that a crypto wallet was on the way in late September, by early November, as many as 1.6 million customers had registered on the platform’s waiting list to be among the first users to try the new wallet. 

Although the release date of Robinhood’s cryptocurrency wallet is currently unknown, it’s widely expected that it will become publicly available in the first half of 2022 - with those who have signed up to the wallet’s waiting list capable of accessing new updates about the time frame for the product’s release. 

Furthermore, Robinhood has introduced a referral scheme to its cryptocurrency wallet waitlist, making it possible for users to invite friends to the platform to move up the list and to gain access early. As the contact joins the app and links their bank account, the referring user moves halfway up the waitlist. 

This can be an extremely appealing incentive for the app’s users as the wallet is currently being trialed among a small group of users, with more being added from the waitlist ahead of launch. 

Whilst the prospect of a dedicated cryptocurrency wallet appears to be highly appealing to Robinhood’s user base, whether the addition will be enough to steer the company out of its troubled start to life on Wall Street remains to be seen. 

However, for a company that’s been dependent on offering access to the cryptocurrency market, the release of a crypto wallet represents a key stepping stone in delivering more financial tools across the ecosystem.