Crypto trading slowdown during Q3 results in revenue miss for Robinhood

Robinhood, the crypto and equities trading platform, released its earnings for the third quarter on Tuesday, showing a decline in interest in the crypto market during that period.

The firm said its total net revenues increased 35% to $365 million, while other financials included a loss of $1.32 billion. Analyst estimates had ranged around $430 million for the period. 

"This quarter was about developing more products and services for our customers, including crypto wallets," said Vlad Tenev, CEO and co-founder of Robinhood. "More than one million people have joined our crypto wallets waitlist to date. With 24/7 live phone support, we believe that Robinhood is becoming the most trusted and intuitive platform for retail and crypto investors. And looking ahead, we're committed to delivering tax-advantaged retirement accounts to help everyone invest for the long term.”

Robinhood, which makes its money from offloading customer orders to large trading firms, saw transaction-based revenues increase 32% to $267 million compared to Q3 2020.

As for its crypto operation, Robinhood said its revenues for the business came in at $51 million — an increase of 860% compared to 2020.

Still, interest in crypto compared to the second quarter of 2021 was lower. 

"Crypto activity declined from record highs in the prior quarter, leading to considerably fewer new funded accounts, a slight decline in Net Cumulative Funded Accounts, and lower revenue in the third quarter of 2021 compared with the second quarter of 2021," the firm said. 

In the second quarter, the firm's earnings showed crypto's share of the company's total revenue increased from 2% to 41%. Between Q2 2020 and Q2 2021, transaction-based revenues from cryptocurrency trading increased by 4,282%.

The firm has been expanding its suite of products, announcing the launch of a wallet feature that would allow users to move their crypto outside of the Robinhood platform. Robinhood said Tuesday that "[m]ore than one million people have joined our crypto wallets waitlist to date."

Environment 'uncertain and evolving'

During the earnings call, Robinhood executives noted that much-asked-for features like new coins, lending or staking are on the horizon, but that the prevailing regulatory environment continues to be a barrier.

CEO Vlad Tenev remarked that "[t]he regulatory environment, in terms of new coins and lending products in crypto, is uncertain and evolving" and that "we're having to carefully evaluate whether we can add new coins in a way that's safe for customers and in line with regulatory requirements."

"[W]e're going to be very careful," Tenev said on the earnings call Tuesday. "We're a regulated entity, and we're hopeful to get some clarity soon on coins. So until then, we'll continue to work with our regulators to hopefully land in a place where regulations allow for innovation and are applied evenly across the industry."