Robinhood has raised a colossal $323 million in its latest funding efforts, making the millennial-focused stock-and-crypto trading app worth approximately $7.6 billion. Despite its mainstream appeal, the “no commission” broker is still worth less than Bitcoin-focused Coinbase, which boasts a valuation of more than $8 billion .
The press release from Robinhood makes it clear that they have been busy since the last round of funding, adding several features to their platform.
“We’re focused on building products and services that expand access to our financial system. Since May of last year, we’ve launched our own clearing system, Clearing by Robinhood; rolled out a new Robinhood Gold experience including Nasdaq Level 2 Market Data; and introduced multi-leg options strategies. We also acquired Robinhood Snacks to bring people digestible financial news; grew our management team, including leaders for operations and finance; and expanded Robinhood Crypto to more than 30 states.”
No mention of the infamous “savings account” that flamed out disastrously before it could even launch.
And when you look at the features that actually did ship, only Robinhood Crypto stands out as anything remotely groundbreaking. Everything else is old news, making the attractiveness of the broker to investors curious until you realize that 4 million people now use their platform.
Meanwhile, Coinbase, which exclusively deals in Bitcoin and other crypto assets, scored an $8 billion valuation last year – in the throes of “crypto winter.”
The fact that Coinbase’s most recent valuation was inked in 2018 after the price of Bitcoin tanked suggests that the cryptocurrency exchange may now be worth more than $8 billion.
Improving prices and sentiment in cryptocurrency markets remain a definite plus for Coinbase’s value, though it’s not clear how much they affect Robinhood.
Even though many will be astounded by the fact that a Bitcoin exchange can be worth more than a legacy finance darling, it should be obvious why.
Robinhood likes to brand itself as different, but the perception couldn’t be further from the truth. No commission doesn’t mean free trading at all, and they perform the anti-client action of selling order-flow to HFTs just like everyone else.
Robinhood’s success is a triumph of marketing. Cost of trading has been coming down for a long time, and they have simply taken a haircut to try and scoop up all the unwanted small accounts in the millennial niche.
They haven’t expanded into Europe, (yet ), perhaps because everyone can trade spread-betting CFDs (contracts for difference). These brokers never charge a commission, and you don’t even have to pay taxes on winnings in countries like the UK and Ireland.
Coinbase, on the other hand, is a pioneer of something wholly new and different. Cryptocurrency has a lot of speculative interest, primarily due to the success of Bitcoin. Combine this with the perceived ability of blockchain to improve many facets of financial efficiency, and its value is clear.
Perhaps it is more surprising that the gap between the two companies is not even more extensive.
Robinhood doesn’t offer anything particularly unique; it’s just packaged in a way that appeals to a younger generation. Coinbase has its failings, but you can’t suggest that it’s not on the ground floor of a groundbreaking industry.
Robinhood’s name implies it is robbing the rich to feed the poor. Take a look at the business fundamentals and it’s quite apparent they’re doing the former – with the jury still out on the latter.