Robinhood shares fall as crypto slump dents trading volume growth

By Manya Saini and Arasu ‌Kannagi Basil

April ​29 (Reuters) - Robinhood's ​shares plunged 11% on Wednesday, as crypto-driven market volatility dampened its first-quarter trading volume growth, leading the trading platform to miss ‌estimates for profit and revenue.

Crypto markets have come under pressure this ⁠year, with bitcoin down more than 30% in the last six months, as a broad ‌risk-off mood took hold, triggering ‌waves of selling across digital assets and curbing retail trading activity.

Robinhood's transaction-based revenue grew a modest 7% to $623 million in the first quarter, missing ​estimates of $728.2 million, according to data compiled by LSEG. Its cryptocurrency revenue came in at $134 million, down 47% from a year earlier.

Analysts at Morningstar ⁠said lucrative cryptocurrency trading represented a "particular pressure point" in the January-March period, with weakness in crypto driving ​a "rough" quarter for the company.

Retail investors, often referred to as mom-and-pop traders, tend to pull back during bouts of volatility as ​repeated swings erode confidence and lead to ‌trading fatigue.

"Trading volumes have been choppier with signs of retail investor exhaustion and revenue capture has trended lower in options ⁠and crypto," analysts at Raymond James wrote in a note.

The crypto sector has expanded at a breakneck pace in recent years, as regulatory uncertainty has given way to ⁠a more supportive environment.

Alongside this shift, the industry has seen a growing roster of crypto-native ​exchanges, while traditional heavyweights such as Charles Schwab and Morgan Stanley's E*TRADE have also made inroads, intensifying competition for trading volumes.

"We expect competitive dynamics to continue to ratchet up ‌in crypto," analysts at KBW wrote in a note, adding that volumes have weakened across the industry in April.

Robinhood has ‌sought to reduce its reliance on trading activity in recent years, which can shift ⁠quickly with market sentiment, and ‌has expanded into a ​broader financial services platform offering a wider range of products.

(Reporting by Manya Saini and Arasu Kannagi Basil in Bengaluru; Editing by ‌Shreya Biswas)

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