Robinhood: Crypto Trading Volume For June Makes Me Pause (Rating Downgrade)

Summary Robinhood Markets, Inc.’s aggressive crypto product expansion, including tokenized stocks and perpetuals, is going to drive its next leg of growth, specifically in the EU. HOOD stock is now up over 107% since I initiated with a Buy back in March based on my tracking of crypto trading volume. I’m downgrading to a Hold now because of what I’ve found from tracking crypto trading: lower crypto trading volume for April, May, and mostly June. I think the stock is higher risk in the near-term, considering that the lower volume traded could show up on earnings and not be digested well by the market post-runup. I hereon share my sentiment on Robinhood stock and why I think investors should cool off from adding at current levels. Investment thesis I initiated my coverage on Robinhood Markets, Inc. ( HOOD ) in late March with a buy at $48 per share, and doubled down on that call in May. Yesterday, Monday, Robinhood came out with a suite of new crypto-focused products , and that with Robinhood’s break into becoming a bank of its own with the Golden subscription making more confident in the company’s future. The stock is now nearing $100 per share, up over 107% since I called buy in March. In that March article, I stressed that the success of Robinhood stock could be somewhat gauged by crypto trading norms: the more crypto is traded, the bigger Robinhood’s cut. Robinhood’s rollout of several new products this week, focused on crypto trading, makes me believe that the company is following the money. A whole new range of crypto-centered offerings is now available on their platform, pushing the average investor to trade even more crypto. The past June saw some of the lowest crypto trading volumes for quite some time, as shown below, lower than both April and May. The Block If this Summer trend of low trading volumes continues into July, then it could very well show up negatively on the company’s next earnings report. This is dangerous considering the stock run-up over the past three months, now trading at $90 per share. Considering this risk into next print, I’m downgrading the stock to a Hold. SeekingAlpha A rundown of Q1 ’25 Robinhood Markets reported a particularly strong first quarter 2025 , with revenue still strong at $927 million, up 50% year over year. Diluted EPS came in at $0.37, up 106% since this time last year. If we split up their revenue, about $583 million came from transactions made on the platform, and $290 million came from interest. While revenue from interest is slowly growing, what we are really interested in is their transaction-based revenue. That really reflects their growth as a trading platform. For the last two quarters, this figure has impressed, in 1Q25 crypto trading made up $252 million, with options and equities making up $240 million and $56 million respectively. Their customer base is also showing strong growth, roughly 26 million traders use the platform, with upwards of 27 million investment accounts. What’s nice to see is that their average revenue per customer is growing, as well, now up to $145, a 39% jump year over year. Robinhood just keeps finding new ways to get its customers to engage on the platform and by extension new ways to monetize its users, with several new ways dropped yesterday, which I’ll explain in detail shortly. I think this is what has kept growth momentum even after Q4 ’25, in which Robinhood saw unexpected crypto trading spikes, which boosted revenue to over $1 billion. Management has doubled down on its success and given its customers a new platform with a fresh look. They know their users trade crypto, now they want them trading it daily and everything else in between. A whole new world of crypto Monday’s new offerings are a bold expansion by Robinhood. They recognize the importance of crypto trading on their platform and want to expand it. For starters, they’re now offering tokenized Stocks and ETFs in the EU, which allows their European users to trade over 200 new assets on a blockchain. As I’m sure you’re all well aware, these tokens somewhat mirror the value of real stocks and ETFs, but are traded 24/7 like crypto. Of course, a 24/7 offering means users will be trading more often, not just during market hours. But why else are blockchain trades a good thing for Robinhood? Well, when a customer trades with tokenized stocks, especially under Robinhood’s blockchain, it bypasses some of the legacy brokerage infrastructure that eats into their trading profits. When using a blockchain, trades go through a decentralized digital ledger, meaning those trades are recorded permanently without the need for a third party. Without a blockchain, trading orders get sent out to the stock exchange and are then cleared by a clearing house like the DTCC. Blockchains cut out any middlemen who take profits at each step. Following this, EU customers will receive even more benefits, including crypto perpetual features. These are essentially crypto derivatives; traders can bet on price movements without an expiry date. Robinhood plans to route these trades through Bitstamp, a European-based crypto exchange that they just acquired for $200 million. Offering customers in the EU higher leverage trades is a lucrative platform for Robinhood. Those with $100 can now control $300 worth of crypto, meaning they end up taking bigger positions than their actual cash. There will be more frequent margin calls and more liquidation events. Also, don’t forget, all these leverage trades will be routed through Bitstamp, which Robinhood now owns. This means Robinhood earns not just as a broker, but also as the exchange; they’ll capture exchange fees on the flip side. Now, let’s get back to U.S.-based customers. What new offerings can they expect? Robinhood will roll out a new crypto staking product via Ethereum and Solana. Staking is basically the process of locking up certain cryptocurrencies (like Ethereum or Solana) to help secure a blockchain network. In return, users earn staking rewards, similar to earning interest or dividends. These rewards are typically paid out in the same crypto. That means stakers can earn passive income, and do it completely from their Robinhood app. The whole process is quite beginner-friendly friendly I may add. Now, of course, Robinhood has something to gain here; they take a percentage of the staking rewards as a fee. Although we don’t know exactly how much this fee is, I looked through the archives and saw that Coinbase usually takes 25% while Kraken used to charge 15% . We can expect Robinhood to charge a similar fee to these figures. Lastly, Robinhood plans to offer a program in which cashback is converted into crypto directly on its platform, just another incentive for people to start trading. Users in the U.S. will be able to convert credit card cashback into crypto investments seamlessly. It’s just another small push to getting their users to trade more crypto, this time through everyday spending via cashback. Valuation With the stock now flirting with the $100 mark, the market cap for Robinhood is now up to $66 billion. Seeking Alpha gives this stock an overbought rating. Forward price-to-sales ratios are 22.57 against a sector median of 2.76. Taking a look at the RSI, we can see this same overbought trend; the RSI is 79 and climbing as of today. It’s no surprise many analysts think this stock is overvalued and it is at current levels. The stock has more than doubled since late March when I first covered it. Looking at the 3-month chart below, Robinhood has heavily outperformed the S&P, making it a very profitable stock for investors. YChart What’s Next Robinhood’s Q2 ’25 earnings are about a month away , set to be released on August 9th. From now until then, investors should hold their stock, while Robinhood has changed its game with these new crypto-related offerings, crypto trading volumes have pulled back in recent months. Bitcoin (BTC-USD) trades were especially low, only just surpassing the $1 trillion mark in terms of trades. For now, investors who have been following my advice should hold onto their earnings but avoid adding at current levels.

Source: Seeking Alpha