It has been an eventful few weeks for Robinhood, the free stock trading app. After raising $363 million in a new funding round, the company was last valued at $5.6 billion. The company now boasts a larger number of customers than E*TRADE, perhaps thanks in large part to its free platform and user-friendly interface. All told, the company is now the second-most-highly valued private fintech startup in the U.S., after Stripe, the company focused on online payments.
However, Robinhood could be poised for even greater heights; while the company got its start as a stock trading app, it turned heads and built even more momentum when it began to initiate cryptocurrency trading through its platform. As Robinhood continues to expand its cryptocurrency coverage and offerings, it has some analysts wondering if this up-and-coming brokerage app might even be able to rival Coinbase, one of the largest and most popular digital currency exchanges around the world.
Quadrupling Valuation and Cryptocurrency Growth
A recent report by Fortune shows that Robinhood’s valuation has skyrocketed over the past year. In its previous fundraising round in 2017, the company was valued at $1.3 billion—impressive, but not nearly as much as the latest figures. The newest round of fundraising is thanks to major investors like DST Global and Sequoia Capital, among others.
Robinhood has continued to expand its platform in various ways since the last round of funding. The company added a web version of the platform, which was previously only available in mobile apps. It also offered commission-free options trading for the first time. The largest move, however, has been to entice users with digital currency trading.
Robinhood Crypto launched in February 2018. In its initial iteration, the service provided opportunities to trade in bitcoin (BTC) and ethereum (ETH), the two largest and most popular cryptocurrencies globally. The service was only available to customers located in California, Massachusetts, Missouri, Montana and New Hampshire. Since that time, based on early success with the initial launch, Robinhood has added Colorado, Wisconsin, Mississippi, and New Mexico to its list of approved customer states. According to co-founder and co-CEO Baiju Bhatt, the company is expanding as quickly as possible based on licensing required to operate in new states, and Robinhood expects to offer cryptocurrency trading to users all across the country by the end of the year.
Robinhood and Coinbase
Coinbase has long been the leader among exchanges offering bitcoin trading in the U.S. It currently has more than 20 million customer accounts. Nonetheless, Bhatt believes that Robinhood will quickly assume its place as a rival of Coinbase.
“We expect by the end of the year to be either the largest or one of the largest crypto platforms out there,” Bhatt said. “But we also really feel we’ll have the absolute best experience for investing in crypto as well.” What will contribute to that user-focused experience? For one thing, commission-free trading. This is one area in which the platform has distinguished itself, both in comparison with digital currency exchanges like Coinbase and against traditional brokerage apps and services. Beyond that, though, Bhatt suggests that Robinhood will have “a large variety of coins available … a more favorable cost structure” and better “quality of product.”
At this point, Robinhood still only offers trading in BTC and ETH. With altcoins on the rise, there is increasing demand for all digital currency platforms to expand their offerings; for its part, Coinbase only offers a few other digital currencies besides the two most popular that it shares in common with Robinhood for the time being. While Robinhood users in those select states can currently only trade in BTC and ETH, though, they are able to track market data for 16 different digital currencies ranging from ripple to Zcash. Bhatt did not indicate which currencies would be added to the list of tradable offerings, although the company has suggested that it will make other cryptocurrencies available for trade.
If Robinhood is able to surpass Coinbase in terms of trading volume or number of users, that may not be enough to guarantee it a top spot in the world of cryptocurrency exchanges. In recent weeks, major Wall Street institutions like Goldman Sachs and Nasdaq have expressed interest in entering the bitcoin trading space. However, supporters of Robinhood feel that it is uniquely positioned against these and other potential competitors. Sequoia Capital partner Andrew Reed suggested that “Robinhood’s produce cadence has been very impressive,” adding that his team “invested because we think that Robinhood has the potential to bring its low-cost and user-first approach to revolutionize large portions of financial services.” Robinhood also believes that it has a leg up on rivals because of its experience negotiating with regulators for its original stock trading platform; Robinhood is a registered broker-dealer with the SEC, while Coinbase is not.
Published at Mon, 14 May 2018 10:11:29 +0000