50% of Robinhood’s Q2 Revenue Came from Crypto – Here’s the Catch
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50% of Robinhood’s Q2 Revenue Came from Crypto – Here’s the Catch

Robinhood now generates significant revenue from digital assets. But do users know they don't really own their crypto?
Neither the author, Kai Morris, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Robinhood’s Q2 2021 report is here, and it reveals plenty of successes for the investment platform. For starters, its total net revenue reached $565 million, and its transaction-based revenue hit $451 million. Of that, 51.6% was made up of crypto transactions, however, there is one caveat when it comes to digital assets on Robinhood.

Despite the popular stock trading platform allowing for crypto trades, it does not give users the ability to send their assets to external wallets, which questions whether people really own their digital assets on Robinhood at all

A Closer Look at Robinhood’s Q2 2021 Report

In Q2, Robinhood broker a number of its previous records, with transaction-based revenue increasing by 7.3% from the last quarter, and a whopping 141% from Q2 2020. This was also the first time in Robinhood’s history where crypto transactions made up over half of its revenue. In Q1 2021, options proved most lucrative, however, crypto has now taken the lead.

Transaction-based revenue in millions – image courtesy of Robinhood.

Crypto engagement increased overall, with “over 60% of [Robinhood’s] net cumulative funded accounts trading in crypto during the second quarter”. It is also the first time more new users made their first trade in the crypto market rather than with equities. It is likely that a large portion of these people initially traded Dogecoin, as Robinhood’s previous reports revealed the trading of Dogecoin generates significant revenue for the app. 

However, it was not all good news for the platform, as it recorded a quarterly net loss of $502 million. This is the second quarter where the platform has made losses, meaning it has not been profitable for the entire year. 

Net losses in millions – image courtesy of Robinhood.

For the end-user, company losses mean very little, but there is one concern constantly looming for Robinhood’s retail traders. Despite the positive outcome from crypto, it is still questionable whether crypto investors own their digital assets on the platform. Robinhood may let people buy and sell assets, but it does not allow people to send them to a separate wallet.

On Robinhood’s support page, they note:

“At this time, we don’t have the functionality to allow customers to transfer their cryptocurrency assets into or out of their Robinhood Crypto account, but we’re currently working on providing those abilities for supported cryptocurrencies.”

If it were true that Robinhood was, in fact, working on bringing this functionality, it would be much less problematic. However, the company’s initial SEC report contradicts this by stating:

“If in the future we were to allow customers to deposit and withdraw cryptocurrencies into and from our platform, such deposits and withdrawals could result in loss of customer assets, customer disputes and other liabilities, which could adversely impact our business, financial condition and results of operations”. 

The Importance of Crypto Ownership

Given such contradicting statements, one might be led to conclude that Robinhood does not think it is financially viable to give people the freedom to control their own wealth. The SEC filing makes it clear the function is unavailable, not because of technical abilities, but rather because they think it would be harmful to their business practices. 

Autonomy is an important concept in the crypto market. It is seen as an alternative to traditional finance, where retail investors can gain complete control over their money, without having to rely on a custodian or intermediary. This is why DeFi has been booming throughout much of 2021

For a company to withhold users’ ability to withdraw their funds, calls into question whether they really own their assets at all. Without being able to freely move your coins and tokens, you can never truly evaluate them. 

With a platform like Robinhood, this is even more significant, as they have controlled the flow of asset transactions in the past, such as with GME and AMC. Considering Robinhood’s poor reputation, nothing can truly be taken for granted. Until they allow for crypto withdrawals, many are sure to proceed with caution, or outright avoid the company. 

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Do you think Robinhood will ever allow crypto withdrawals? Let us know in the comments below.

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