Gen Z's Crypto New Darling, How Much Further Can Robinhood Grow?

Original Title: "Gen Z's New Favorite Crypto, How Much Further Can Robinhood Rise?"

Original Source: RockFlow

Key Takeaways

1. Robinhood's rise in the crypto business stems from three key advantages the company has accumulated over the years: a large young user base established through its zero-commission model, the infrastructure and technological prowess behind product innovation, and user investment habits cultivated during the meme stock craze.

2. Recent quarterly reports have shown that Robinhood's stock price surge by 2024 was largely driven by the unexpectedly strong recovery of its crypto business. Particularly, in the third quarter of 2024, crypto revenue skyrocketed by 165% year-over-year to $61 million, becoming a dual engine of revenue growth alongside options trading.

3. Looking ahead, Robinhood's expansion into the EU and UK markets, coupled with its core user base (Millennials and Gen Z) being among the most active participants in cryptocurrencies, as well as the regulatory relaxation trend under the new administration and the potential benefits of crypto, will all provide significant growth opportunities for its crypto business.

In the 24/7 trading frenzy of the crypto market, one name is increasingly being mentioned by investors—Robinhood. This fintech platform founded by two Stanford students has not only disrupted traditional Wall Street with its zero-commission model but has also pioneered a new frontier in the crypto space.

When Baiju Bhatt and Vlad Tenev persisted in their dream after facing 75 failed funding attempts, they may not have imagined that Robinhood would eventually become a crucial bridge connecting traditional finance with digital assets.

Previous articles by RockFlow have provided detailed insights into Robinhood's history, the GME event, and Payment for Order Flow (PFOF)—"Robinhood: There Is No Free Lunch, Only Everlasting Bagholders."

In this article, RockFlow’s research team will delve into its core crypto business, exploring the reasons behind its 383% stock price surge in the past year, meticulously analyzing its current investment value, and bullish catalysts for the future.

1. Three Waves of Growth Setting the Stage for Crypto's Rise

Robinhood's outperformance in the crypto business is no coincidence. Three waves of revolutionary trends gradually built a strong user base and product innovation capability, laying a solid foundation for its subsequent soaring in the crypto business.

Robinhood initially entered the market with a zero-commission model, breaking the traditional brokerage's $8-10 commission barrier. By eliminating minimum deposit requirements and supporting fractional share trading, it successfully attracted a large number of young users, establishing initial trust in the platform. This laid a valuable user base for future expansion into innovative services like cryptocurrency.

In the second wave of growth, Robinhood demonstrated outstanding product innovation capabilities. By integrating gamification elements into the trading experience, creating a clean and intuitive interface design, and implementing an attractive stock reward mechanism, the platform achieved remarkable growth. During this period, the trading volume reached 9 times that of E-Trade, and the options contract trading volume even surpassed Charles Schwab by 88 times, showcasing its strong technological prowess and product operational capabilities. These capabilities were later successfully applied to the development of cryptocurrency trading products.

In the third wave of growth, Robinhood played a central role in the Meme Stock and cryptocurrency frenzy. The platform became the main battleground for popular stocks like GameStop, AMC, and cryptocurrencies like Dogecoin, setting a record in January 2021 with a monthly new account opening surpassing the total of all other brokerages. This period not only brought a large number of active users but, more importantly, nurtured users' investment habits in emerging asset classes.

Robinhood's revolutionary waves of user growth three times not only changed the brokerage industry landscape but also reshaped the entire investment culture. Under its influence, retail investors rose in power, accounting for 20% of total trading volume. The younger generation began to view investment as part of their lifestyle, a mindset shift that led to the popularization of innovative financial products like cryptocurrency.

The accumulated advantages—massive user base, strong technological capabilities, mature operational experience, and profound influence on investment culture—have together formed the cornerstone of Robinhood's success in the cryptocurrency field.

2. Crypto Revenue Surges, Driving Robinhood's Stock Price to Double

With the gradual recovery of the cryptocurrency market since 2023, Robinhood has also benefited. In its recent quarterly earnings reports, the share of cryptocurrency revenue has been increasing. The following chart shows Robinhood's revenue over the past 9 quarters, with the growth in options revenue and crypto revenue being particularly notable:

Taking the most recent 2024 Q3 earnings report as an example, crypto revenue surged by 165% year-over-year to $61 million, demonstrating remarkable growth momentum. This achievement not only confirms the company's strategic vision in the cryptocurrency field but also highlights its outstanding execution during the business expansion process.

Robinhood's revenue mainly comes from three key areas: Transaction Revenue, Net Interest Income, and Other Revenue. Among them, Transaction Revenue saw a significant year-over-year increase of 72% to reach $319 million, with the cryptocurrency business growing at a stunning rate of 165% year-over-year, becoming one of the most prominent segments. This achievement, along with Options Transaction Revenue ($202 million), formed the dual engines driving the company's revenue growth.

Despite its rapid growth, Robinhood has not overlooked the stability of its business. Net Interest Income increased by 9% year-over-year to $274 million, providing the company with a stable cash flow. Innovative services such as Gold subscriptions drove Other Revenue up by 42% to $44 million, and the 2.2 million strong cohort of premium users demonstrated user recognition of the platform's services.

Furthermore, the platform achieved over $100 billion in net deposits for the third consecutive quarter, highlighting users' high level of trust in Robinhood. This trust not only supports the development of traditional business but also provides a solid foundation for the expansion of innovative businesses such as cryptocurrency.

It is noteworthy that while pursuing high-speed growth, Robinhood has maintained cautious cost control, keeping the full-year 2024 operating expense outlook in the range of $1850-1950 million. This balanced growth and efficiency strategy provide assurance for the continued development of innovative businesses such as cryptocurrency.

From this financial report, it is clear that Robinhood is gradually transitioning from a traditional zero-commission trading platform to a comprehensive financial technology platform with cryptocurrency as a key growth driver. The outstanding performance of its cryptocurrency business not only brings substantial revenue growth to the company but also heralds a broad future in the new era of cryptocurrency.

3. Why Robinhood is Still Worth Looking Forward to in 2025?

Despite a 383% increase in Robinhood's stock price over the past year, based on its unique market opportunity, the RockFlow Research Team remains optimistic about its performance in 2025. This confidence is largely driven by its proactive approach in the cryptocurrency field.

Robinhood's core user base is mainly concentrated in the millennial and Gen Z demographics, precisely the most active participants in cryptocurrency. As wealth transfers from the older generation to the younger generation, these assets are likely to flow to platforms that better meet the investment needs of the new generation. As a bridge connecting traditional finance and crypto innovation, Robinhood will reap significant benefits from this wealth transfer wave.

In addition, Robinhood's international expansion strategy has placed particular emphasis on the importance of its crypto business: EU Market: Actively expanding its crypto business in the EU, positioning it as a key pillar of its internationalization; UK Market: Pioneering its business in the London financial district, laying the foundation for future crypto service expansion.

Furthermore, Robinhood has strengthened its crypto business competitiveness through various initiatives: for example, its developed futures trading infrastructure can provide technical support for future crypto derivative trading; the Gold membership service is expected to offer users more crypto-related privileges; continuous optimization of the trading interface and services can also enhance user engagement in crypto trading.

Overall, Robinhood's crypto business development reflects a clear global mindset and innovation orientation. By integrating traditional finance with crypto services, the company is building a more inclusive financial ecosystem. Its presence in the European market, especially the expansion of its crypto business, demonstrates the company's long-term commitment to the digital asset field. As the global crypto market continues to mature, Robinhood is poised to occupy a more significant position in this rapidly evolving space.

On the policy front, following Trump's official inauguration, the impact he will have on the stock market and the crypto industry will also be a key driver in boosting Robinhood's stock price.

It is well known that the Trump administration has always advocated for reduced financial regulation, potentially lowering compliance costs and simplifying compliance processes further. Fintech companies like Robinhood that rely on flexible operations may benefit from a more relaxed regulatory environment. If the crypto sector continues to receive clear policy support (such as a clear regulatory framework or relaxed restrictions), Robinhood's crypto business will continue to grow beyond expectations.

Moreover, although the new president has been in office for less than a month, the volatility he has brought to the market is significantly increasing. The market has already seen tariff policies implemented (and the subsequent delays) causing major fluctuations in the stock market, intensifying the volatile stock market, which significantly impacts retail trading activity. Robinhood's trading volume and commission revenue (especially from options) may noticeably increase as a result.

Conclusion

The RockFlow Research Team believes that Robinhood is demonstrating remarkable growth potential: its core user base (Millennials and Gen Z) are precisely the most active participants in cryptocurrency, benefiting from the upcoming generational wealth transfer; coupled with the improvement of the trading infrastructure, innovation in the Gold membership service, the Trump administration's regulatory relaxation tendencies, and the potential crypto benefits, these measures will collectively propel Robinhood to a more prominent position in the global crypto market.

While facing regulatory pressure and market volatility in the short term, Robinhood is expected to become an important bridge connecting traditional finance with the future of crypto in the long run. Its investment value is worth long-term attention.

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