Robinhood adds new revenue stream as institutional finance provide investors regulated options to participate

• Robinhood declared plans to acquire credit card fintech X1 for almost $100 million, shifting gaze from the Bitcoin ETF hype.
• The move is expected to deepen the crypto and stock trading app's relationship with existing customers.
• It joins the likes of BlackRock and WisdomTree in providing investors with regulated avenuesto participate in the BTC market.

Robinhood has added to its list of revenue streams with a new acquisition in a move meant to provide investors with more regulated ways to participate in the cryptocurrency market. The decision aligns with actions by institutional finance players such as BlackRock and WisdomTree, among others, who have committed to making the Bitcoin market more active.

Also Read: Bitcoin ETF summer, Valkyrie investment firm joins BlackRock, WisdomTree, and Invesco in spot BTC application

Robinhood acquires credit card fintech X1

Robinhood, a crypto and stock trading application, is spending up to $95 million in a deal to acquire X1, a no-fee credit card finance technology firm.

The acquisition brings the credit element to Robinhood's suite of offerings, which already contains debit cards, thereby offering customers a more expansive avenue to participate in its stock and crypto market. This is akin to what players in institutional finance like BlackRock and WisdomTree have been doing with their spot BTC applications. Citing Vlad Tenev, CEO and co-founder of Robinhood, in the announcement:

This acquisition will bring us closer towards our goal of serving the entirety of our customers' critical financial needs. Together with X1, Robinhood will now be able to offer our customers access to credit.

As reported, institutional interest in the crypto market is growing as the US Securities and Exchange Commission (SEC) tightens its grip on the industry. With this clampdown, firms are flocking to enter the market, which explains the recent surge in the number of spot BTC Trust applicants. It is evidence of firms recognizing the industry's demand for regulated investment products, with stakeholders from different lines of trade looking to capitalize on the opportunity.

The acquisition, expected to conclude in the next three months, marks the sixth of such deals since 2019, after MarketSnacks, Cove Markets, Binc, Say, and Ziglu. It is part of an unending effort to survive as the company continues to survive a difficult market.

Notably, the company's recent earnings report shows a more than 25% decrease in its monthly active user base during Q1 of 2022, falling from 16 million to around 12 million by Q1 of 2023. Robinhood's crypto trading arm also suffered a 30% revenue drop year-on-year, moving from $54 million in the first quarter of 2022 to $38 million in 2023.

Nevertheless, the acquisition has sparked interest among market participants in the current trend among bigger fintechs to scoop up the sector's smaller, venture capital-backed upstarts. Among the ones that have been reported recently include Stripe, which bought Okay at an undisclosed price; Rho, which purchased Party Round also at an undisclosed price; and BitGo, which demonstrated a willingness to acquire cryptocurrency custodian Prime Trust in a  non-binding agreement.

 

Jor Law, interim CEO and President of Prime Trust, commented on the intended acquisition, saying:

The combination of Prime Trust and BitGo would significantly enhance the industry." No other company will have the breadth of products and services nor depth of experience that this combined company would have. We are excited to offer our world-class infrastructure within a broader ecosystem and revolutionize the future of crypto.

Meanwhile, the Bitcoin ETF narrative continues to bode well for Bitcoin (BTC) price, which is recording a weekly rise of 17% and a 10% rise on the month. According to Coinglass data, this newly found interest in BTC among institutional players has triggered liquidations exceeding $82.67 million in short positions, the largest volume of shorts liquidated since last month. 

---