bitcoin price rally is no salve for trading woes

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Think this year’s S&P 500 rally of 15 per cent is pretty good? Take a look bitcoin’s price, which has more than doubled since January.

Yet even that has done little to lift the fortunes of Robinhood. The company, whose app allows users to trade a number of cryptocurrencies, has lost four-fifths of its value since hitting a high in 2021. The stock fell another 15 per cent on Wednesday.

Third-quarter earnings underscore how the app is losing its cachet among young traders.

Robinhood’s funded accounts grew by 360,000 year-on-year to 23.3mn. But fewer customers are actively trading. The number of monthly active users fell 16 per cent to just over 10mn compared with the period for the prior year. That is about half the figure reached at the height of the retail trading frenzy two years ago.

The company’s woes are not shared by all its rivals. Brokerage platform Charles Schwab added 665,000 active accounts during its third quarter. Morgan Stanley, which owns E*Trade, added about 300,000 accounts during the September quarter.

Overall, Robinhood’s transaction-based revenue fell 11 per cent to $185mn during the quarter, amid a sharp drop in crypto and equities trading. It now makes more from its customers’ idle cash. Segregated client accounts hold about $3.5bn of cash and securities. Revenue from net interest income nearly doubled year-on-year to $251mn. Even so, it booked a net loss of $85mn.

The boost from net interest income should soon diminish. The Federal Reserve appears to have finished raising interest rates. That will make for tougher comparatives in future. This is reflected in Robinhood’s lowly valuation of less than four times revenue. Charles Schwab manages five times.

Robinhood has sought to reinvent itself by branching out into new products such as retirement accounts. But to do so it will compete against established brands like Charles Schwab and Fidelity. It needs to find more arrows in its quiver to draw in more active traders.

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