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Warning from Robinhood: Retail trading is slowing, especially when it comes to crypto

Kitco News

(Kitco News) Robinhood, the popular retail trading platform, is warning of a slowdown in retail trading activity, especially when it comes to crypto.

"We expect our revenue for the three months ending September 30, 2021, to be lower, as compared to the three months ended June 30, 2021, as a result of decreased levels of trading activity relative to the record highs in trading activity, particularly in cryptocurrencies, during the three months ended June 30, 2021, and expected seasonality," Robinhood said in a filing with Securities and Exchange Commission.

The estimated slowdown in trading is in comparison to a record second-quarter Robinhood saw this year.

On Monday, the popular trading app filed with the U.S. Securities and Exchange Commission to start its IPO, with plans to raise more than $2 billion in its IPO. The company is hoping to sell 55 million shares at a range of $38 to $42 per share.

Robinhood is also projecting a slowdown in new clients in Q3. "We anticipate the rate of growth ... will be lower ... due to the exceptionally strong interest in trading, particularly in cryptocurrencies, we experienced in the three months ended June 30, 2021 and seasonality in overall trading activities," according to the filing.

The trading app, which aims to democratize investing, is looking for the second-quarter revenue to be between $546 million and $574 million, which is 129% higher than during the same period a year ago.

Robinhood reported a record new number of younger investors entering the market during the pandemic. This retail trading frenzy was evident when meme stock trading mania took hold of some stocks, including GameStop and AMC.

"We experienced strong growth in new customers during the first six months of 2021," the filing said. "We do not know whether, over the long term, cohorts comprised of these new customers will have the same characteristics as our prior cohorts. To the extent these new customers do not grow their cumulative net deposits or trading frequency on our platform to the same extent as new customers that joined in prior periods, our ability to expand and grow our relationship with these customers will be impacted."

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