Robinhood’s crypto trading revenue may be on the decline, according to JPMorgan analyst Ken Worthington, as a ‘risk-off’ environment erases market gains and leads to softer demand for margin and derivatives trading.
A recent surge in cryptocurrency trading revenue by Robinhood in the fourth quarter of last year may be short-lived, according to ‘a risk-off environment that erased much of the market’s gains since the start of the year’ , as forecasted by JPMorgan analyst Ken Worthington.
The global crypto trading market has witnessed significant growth in recent years, with revenue increasing exponentially.
According to a report by CoinMarketCap, the total trading volume for cryptocurrencies reached $2.3 trillion in 2021.
The top five exchanges, Binance, Coinbase, Huobi, Kraken, and OKEx, accounted for over 90% of the market share.
This surge in trading activity has been driven by increased adoption, improved infrastructure, and rising investor confidence.
The fourth quarter saw a staggering 700% surge in cryptocurrency trading revenue, which contributed to a significant jump in Robinhood‘s overall transaction-based revenue. However, Worthington expects this momentum to stall in the first quarter, with digital asset volumes expected to decline by around $19 billion from the prior quarter to $52 billion.
The analyst attributes this downturn to a decrease in both equity and crypto markets, particularly in the latter half of the quarter. This ‘risk-off environment’ is likely to lead to softer demand for margin and derivatives trading, which could weigh on Robinhood‘s overall performance.
Despite the expected decline in digital asset volumes, Worthington expects Robinhood‘s assets under custody (AUC) to remain strong, increasing by 41% year-over-year. The analyst also notes that Robinhood will report its first quarter results after the U.S. market close on Wednesday.
Worthington maintains a neutral rating on Robinhood‘s stock, citing concerns about the company’s ability to sustain its growth momentum in the face of weaker market sentiment. The analyst has trimmed his year-end price target from $45 to $44, suggesting around 10% downside from the current price.
JPMorgan analyst Ken Worthington forecasts a decline in Robinhood‘s crypto trading revenue in the first quarter.
Weaker market sentiment and slowing trading activity are expected to contribute to this downturn.
Digital asset volumes are expected to decline by around $19 billion from the prior quarter to $52 billion.
Robinhood‘s assets under custody are expected to increase by 41% year-over-year.
Worthington maintains a neutral rating on Robinhood‘s stock and has trimmed his price target from $45 to $44.
