After the popular trading app Robinhood recently disclosed that a large part of its cryptocurrency trading sales in the second quarter were generated by the “joke cryptocurrency” Dogecoin (DOGE), a financial expert is sounding the alarm.
Steven Cubak from Wolfe Research first states that “Robinhood’s growth in the crypto industry is absolutely astonishing”, but the “disproportionately large” part that Dogecoin accounts for cannot simply be ignored.
As reported, the current quarterly report for Q2 shows that trading in cryptocurrencies at Robinhood now accounts for 41% of total sales. Accordingly, the platform was able to raise $ 233 million from the crypto business in Q2 2021 alone, an increase of $ 5 million compared to the whole of 2020.
The crypto trade is currently doing impressively strong for the Robinhood, but 62% of the sales achieved in Q2 come from trading the “joke crypto currency” Dogecoin, which has experienced a real hype on social media in recent months.
Chubak points out that the percentage of Dogecoin in Robinhood’s sales increased from 6% in Q1 2021 to 26% in Q2. However, this new dependency could now be the undoing of the trading app, because the trading volume for Dogecoin has already decreased by 78% in Q3 and is now below the value from Q1 again. For this reason, the expert warns:
“We estimate the decline in Q3 will be much worse than most investors suspect. […] Fintech investors who want to invest in the long term remain unaffected, but in the short term investors should better expect it. “
The Robinhood’s most recent IPO was disappointing, because the shares of the trading platform fluctuate so much that their trading has already been temporarily suspended several times. The company forced a trading stop in its trading app in January when the Dogecoin (DOGE) had shot up by more than 900%, which caused a lot of criticism.
At the time of going to press, Robinhood’s share price is just under 5% in the red.