How much room does Robinhood, the new crypto darling of Generation Z, have to grow?

Source: RockFlow Universe

Key Points

① The rise of Robinhood's crypto business stems from the three advantages accumulated by the company over the years: a large young user base established from the zero-commission model, the infrastructure and technical strength behind product innovation, and the user investment habits cultivated during the meme stock boom.

② Recent quarterly financial reports show that Robinhood's 2024 stock price surge is inseparable from the unexpected recovery of its crypto business. In particular, crypto revenue in the third quarter of 2024 surged 165% year-on-year to $61 million, becoming the company's dual engine of revenue growth together with options trading.

③ Looking ahead, Robinhood's layout in the EU and UK markets, coupled with its core user base (millennials and Generation Z) being the most active participants in cryptocurrencies, as well as Trump's new policy's tendency to relax regulations and potential benefits for cryptocurrencies, will all bring considerable growth space to its crypto business.

In the 24-hour trading frenzy in the crypto market, a name is being mentioned by more and more investors - Robinhood. This financial technology platform founded by two Stanford students not only leveraged traditional Wall Street with a zero-commission model, but also created a new world in the crypto field.

When Baiju Bhatt and Vlad Tenev persisted in their dreams after 75 failed financings, they probably never thought that Robinhood would eventually become a key bridge connecting traditional finance and digital assets.

This article will go deep into the core of its crypto business, explore the reasons why its stock price has soared 383% in the past year, and carefully analyze its current investment value and future bullish catalysts.

1. Three waves of growth, foreshadowing the rise of crypto

It is no accident that Robinhood's crypto business has exceeded expectations. Three revolutionary waves have gradually built a strong user base and product innovation capabilities, laying a solid foundation for its subsequent take-off in the crypto business.

Robinhood initially entered the market with a zero-commission model, breaking the $8-10 commission barrier of traditional brokerages. By eliminating the minimum deposit requirement and supporting fractional share trading, it successfully attracted a large number of young users and established users' initial trust in the platform. This has accumulated a valuable user base for the future expansion of innovative businesses such as encryption.

In the second wave of growth, Robinhood demonstrated its outstanding product innovation capabilities. By incorporating gamification elements into the trading experience, creating a simple and intuitive interface design, and combining it with an attractive stock reward mechanism, the platform achieved amazing growth. The trading volume during this period reached 9 times that of E-Trade, and the option contract trading volume reached 88 times that of Charles Schwab, proving its strong technical strength and product operation capabilities. These capabilities were later successfully applied to the development of encryption trading products.

In the third wave of growth, Robinhood played a core role in the meme stock and cryptocurrency craze. The platform has become the main battlefield for trading popular stocks such as GameStop and AMC, as well as cryptocurrencies such as Dogecoin. In January 2021, it set a record for the number of new accounts opened in a single month, exceeding the total of all other brokerages. This period not only brought a large number of active users, but more importantly, cultivated users' investment habits in emerging asset classes.

Robinhood's three revolutionary waves of user growth have not only changed the landscape of the brokerage industry, but also reshaped the entire investment culture. Under its influence, retail investors have risen, accounting for 20% of all trading volume. The younger generation has begun to regard investment as part of their lifestyle, and this change in concept has created a favorable environment for the popularization of innovative financial products such as cryptocurrencies.

These accumulated advantages - a large user base, strong technical capabilities, mature operating experience, and a profound impact on investment culture, together constitute the cornerstone of Robinhood's success in the crypto field.

 2. Cryptocurrency revenue continues to soar, driving Robinhood's stock price to double

With the gradual recovery of the crypto market since 2023, Robinhood has also benefited from it. In its recent quarterly financial reports, the proportion of crypto revenue has gradually increased. The following figure shows Robinhood's revenue in the past 9 quarters, among which the growth of options revenue and crypto revenue is particularly eye-catching:

Taking the recently released third quarter 2024 financial report as an example, crypto revenue soared 165% year-on-year to US$61 million, showing an astonishing growth momentum. This achievement not only confirms the company's strategic vision in the crypto field, but also demonstrates its excellent execution in the process of business expansion.

Robinhood's revenue mainly comes from three major sectors: trading income, net interest income, and other income. Among them, trading income increased by 72% year-on-year to US$319 million, and the crypto business became one of the most dazzling sectors with a year-on-year growth rate of 165%. This achievement, together with option trading income (US$202 million), constitutes the company's dual engines of revenue growth.

While developing rapidly, Robinhood has not neglected the robustness of its business. Net interest income increased by 9% year-on-year to US$274 million, providing the company with stable cash flow. Innovative services such as Gold subscriptions drove other income to grow by 42% to US$44 million, and the 2.2 million advanced user groups proved that users recognized the platform's services.

In addition, the platform achieved a net deposit of more than US$10 billion for the third consecutive quarter, highlighting the high trust of users in Robinhood. This trust not only supports the development of traditional businesses, but also provides a solid foundation for the expansion of innovative businesses such as cryptocurrency.

It is worth noting that while pursuing rapid growth, Robinhood still maintains prudent cost control, and expects operating expenses for the full year of 2024 to be maintained in the range of US$1.85-1.95 billion. This strategy of balancing growth and efficiency provides a guarantee for the continued development of innovative businesses such as encryption.

It can be clearly seen from this financial report that Robinhood is gradually transforming from a traditional zero-commission trading platform to a comprehensive financial technology platform with cryptocurrency as an important growth pole. The outstanding performance of its encryption business not only brings considerable revenue growth to the company, but also indicates its broad prospects in the new era of encryption.

3. 2025, why is Robinhood still worth looking forward to?

Although Robinhood's stock price has increased by 383% in the past year, the RockFlow investment research team is still optimistic about its performance in 2025 based on its unique market opportunities. This confidence is largely due to its active layout in the crypto field.

Robinhood's core user groups are mainly concentrated in millennials and Generation Z, who happen to be the most active participants in cryptocurrencies. As the wealth of the older generation is transferred to the younger generation, these assets are likely to flow to platforms that can better meet the investment needs of the new generation. As a bridge between traditional finance and crypto innovation, Robinhood will benefit significantly from this wave of wealth transfer.

In addition, Robinhood's international expansion strategy particularly emphasizes the importance of crypto business: EU market: actively deploy EU crypto business and use it as an important fulcrum for internationalization; UK market: develop business in the City of London to lay the foundation for the expansion of future crypto services.

Finally, Robinhood has strengthened the competitiveness of its crypto business through various measures: for example, the futures trading infrastructure it has developed can provide technical support for future crypto derivatives trading; the Gold membership service is expected to provide users with more crypto-related privileges; and the continuously optimized trading interface and services can also enhance users' participation in crypto trading.

Overall, Robinhood's crypto business development reflects a clear global mindset and innovation orientation. By integrating traditional finance and crypto services, the company is building a more inclusive financial ecosystem. Its layout in the European market, especially the expansion of its crypto business, demonstrates the company's long-term development determination in the field of digital assets. As the global crypto market continues to mature, Robinhood is expected to occupy a more important position in this rapidly developing field.

In terms of policy, after Trump officially takes office, his impact on the U.S. stock market and the crypto industry will also become an important driving force to stimulate Robinhood's stock price.

As we all know, the Trump administration has always advocated reducing financial regulation, which may further reduce compliance costs and simplify compliance processes. Financial technology companies such as 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.

Secondly, although the new president has been in office for less than a month, the volatility he has brought to the market is increasing significantly. The market has seen that the implementation of tariff policies (and the subsequent delays) has caused the U.S. stock market to fluctuate greatly. The more volatile stock market has a significant impact on the activity of retail investors, and Robinhood's trading volume and commission income (especially options) may increase significantly as a result.

Conclusion

RockFlow's investment research team believes that Robinhood is showing impressive growth potential: its core user base (millennials and Generation Z) is the most active participant in cryptocurrencies and will benefit from the upcoming intergenerational wealth transfer; coupled with the improvement of trading infrastructure and innovation of Gold membership services, as well as the deregulation tendency of Trump's new policy and the potential benefits of cryptocurrencies, these measures will jointly promote Robinhood to occupy a more important position in the global crypto market.

Although it may face regulatory pressure and market volatility in the short term, in the long run, Robinhood is expected to become an important bridge connecting traditional finance and the future of cryptocurrencies, and its investment value deserves long-term attention.