JP Morgan: Robinhood Userbase Drop Could Mean 20% Fall in Stock Price
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JP Morgan: Robinhood Userbase Drop Could Mean 20% Fall in Stock Price

Robinhood experiences a more significant decline in users than previously expected, leading to a possible fall in its stock price.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Analysts at JP Morgan have found a decline in active users and app downloads on the popular trading platform Robinhood. The drop has exceeded expectations, raising concerns about a likely crash of about 20% to the company’s stock price.

With more Robinhood insider shares expected to be released, the reduction in trading activity and revenue on the platform could trigger a decline in its stock price over the remainder of 2021. Analysts Kenneth Worthington and Samantha Trent questioned Robinhood’s ability to generate competitive margins while ensuring sustainable growth.

Analysts found a 78% fall in the number of Robinhood app downloads in the third quarter compared with the second quarter of 2021. The active daily users also fell by 40% in the same period.

Why Are Robinhood Users Declining?

Firstly, there has been a plunge in the retail traders, which is far from what we witnessed earlier in 2021. Also, lockdown restrictions eased in the USA, the commencement of sports activities, and the opening of the economy has seen a huge chunk of retail investors pursue these other interests.

Secondly, the ongoing lawsuit Robinhood is embroiled in is another source of concern for users. The class-action suit filed concerning the GameStop/AMC saga alleges collusion between Robinhood and its partners to manipulate the market.

Finally, the general increase in rival trading platforms has played a role in the decline. These Robinhood alternatives offer similar and sometimes more appealing features to users without any associated issues or scandals.

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Markets Are Growing Increasingly Fearful

Robinhood is not the only platform witnessing a decline in its user base; Coinbase and Binance have also seen their user base reduce significantly. This decline comes on the back of fears that the stock market is on the verge of an imminent crash. With the Pandemic retail trader boom slowly declining, a certain level of FUD has returned to the market. The Evergrande debt situation could have far-reaching consequences for the second-largest economy in the world. This, combined with the rising US debt ceiling, has led to increased fear.

Business Tycoon Robert Kiyosaki tweeted this sentiment on the state of the market:

Binance, Coinbase, and other crypto apps that rode the retail trading trend experienced a fall of about 50% and 23% respectively for in-app downloads and daily active users in Q3 of 2021.  This trend is set to continue in Q4 as well. 

Source: Cryptoquant

Statistics from Cryptoquant appear to add credence to this narrative, through the amount of inflow seen on both exchanges.  

Source: Cryptoquant

As seen in the charts above, the level of BTC inflows into both platforms was at a peak in the first and second quarters of 2021 before a noticeable decline at the start of the third quarter. This coincides perfectly with the usage of the exchanges over the period of time.

Do you still have the Robinhood app downloaded? Let us know in the comments below:

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