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The Robinhood app.
Bloomberg
About 6 million new users bought cryptocurrencies on Robinhood in just the first two months of this year, a remarkable rate that could threaten the dominance of crypto exchanges like Coinbase. And February isn’t even over yet.
Robinhood revealed the new stats on Thursday, and provided some context to show how much crypto trading has lifted off this year. The privately held broker said it added about 200,000 new crypto users a month last year, indicating that it added about 2.4 million in all of 2020. But that rate has accelerated this year: in both of the first two months of 2021, it has added more than 2.9 million new crypto users.
Robinhood’s account growth comes as Bitcoin has hit new highs, rising above $58,000 last week and trading around $49,000 now.
Robinhood, which started offering crypto in 2018, hasn’t released how many total crypto users it has, and it hasn’t revealed its total customer base since last May, when it said it had more than 13 million customers. But on a gross basis, it appears that more than 8 million new customers have traded crypto on Robinhood since the start of 2000.
In the prospectus it made public on Thursday in advance of going public, Coinbase said it ended 2020 with 43 million retail users, up from 32 million at the end of 2019.
In addition, Coinbase has attracted 7,000 institutional customers, an area that may be even more lucrative than retail trading. Institutions are less likely to trade on platforms like Robinhood.
A Coinbase spokeswoman said the company wouldn’t be able to comment on its account growth so far this year because it is in a quiet period ahead of its public listing.
Robinhood doesn’t offer as many options for buying and selling cryptocurrencies as Coinbase. It supports seven cryptocurrencies, whereas Coinbase allows buying and selling in more than 40. And Coinbase offers its users more capabilities—they can move crypto to their own digital wallets, for instance, while Robinhood users must keep the crypto on its platform.
The companies also have different business models. Coinbase makes most of its money from transaction fees. Robinhood makes money on crypto by routing trades to market-makers and taking a rebate from the profits that they make — a practice similar to the payment for order flow that Robinhood makes from stock-trading that has recently been in the news.
Other companies like
Square
(SQ) and
PayPal Holdings
(PYPL) also have benefited by letting users buy and sell cryptocurrencies.
It remains to be seen whether investors will gravitate to platforms like Coinbase that have specialized services for crypto, or to multi-asset platforms like Robinhood. One industry executive said in an interview earlier this week that she sees momentum toward more diversified platforms.
“They don’t want one app for crypto and one for regular investing,” said Joanna Coles, who will be on the board of Apex Clearance, which makes technology that powers several brokers and will go public through a SPAC later this year. “They want all of it together.”
Write to Avi Salzman at avi.salzman@barrons.com