The Wolf Den #933 - It's All Good In The Hood
Robinhood.
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In This Issue:
It’s All Good In The Hood
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Making Money With AI Trading Algo | $10,000 Portfolio | The Bitcoin Cheat Code
Major Developments In Coinbase Vs. SEC
Fidelity Files For A Spot ETH ETF And More
XRP Dump Ahead? Will Ripple Survive? Should You Withdraw Your Funds From KuCoin? | MetaLawMan
It’s All Good In The Hood
The crypto community and retail as a whole have a love-hate relationship with Robinhood, but that hasn’t stopped the company from pushing through negative PR and building a strong name. This is the story of Robinhood.
Robinhood was founded in 2013 by Vladimir Tenev and Baiju Bhatt, who came from backgrounds in building high-frequency trading platforms. Robinhood wasn't an overnight success, but it quickly began to earn the respect and trust of millennial investors eager to start their investment journey.
As Robinhood began to win over the younger demographic, the platform made a major strategic maneuver to acquire an entirely new cohort of investors by offering crypto trading on the platform back in 2018. From that point on, Robinhood became a major talking point in an industry that takes no prisoners and would strike with a vengeance if the platform ever crossed a line…
This move strategically and uniquely positioned Robinhood to transform its image from 'just another retail investment app' to one that was willing to take a contrarian risk on a nascent asset class, which turned out to be right and ahead of its time. Within three years, every state in the U.S. except Hawaii and Nevada offered crypto trading, and the company's lucrative bet is still massively paying off to this day.
Things were looking up for Robinhood and an IPO was in the cards, but the story isn't exclusively a crypto story; it's an everything retail story, and not every coming chapter had a happy ending.
Around 2020, for better or worse, the COVID lockdowns and market crash marked a turning point for the app as it surged in popularity among the masses. All the right variables came into play for retail traders to solidify their position in the financial arena, using the app as a funnel to speculate on stocks that would have otherwise been solely left in the hands of Wall Street. Retail traders latched on to everyday companies such as Hertz, Bed Bath & Beyond, AMC, BlackBerry, and of course, GameStop, giving these companies one last epic pump. This was all thanks to Robinhood's ability to earn the trust of young, motivated, high-risk investors who needed a platform.
Things were looking up for Robinhood… or so they thought.
We all know how the GameStop story ended, at least to some extent, depending on whether you believe Robinhood was the bad guy or if it was Wall Street and Melvin Capital. Regardless, retail traders suffered significant losses, and seven years of Robinhood's PR efforts seemed to be thrown out the window. At this time, Twitter Spaces and Clubhouse were just starting to gain popularity, so every crypto trader, influencer, and Joe Schmo investor had an incentive and interest to discuss Robinhood, either for clout, to argue why blockchain was necessary, or because they had nothing better to do. At this point, Robinhood had a lot of work ahead to repair its reputation.
The GameStop fiasco was indeed the largest PR blunder for the platform, following a series of other issues including a security breach, an infinite leverage glitch, outages, and the tragic suicide of Alexander E. Kearns. Post IPO, the stock took a nosedive and the lack of experience the founders had in managing a multi-billion-dollar company was publicly showing. Robinhood was not throwing in the towel.
The identity of Robinhood could be seen closely in line with serving the simple needs of retail, but a closer look proves that the core of company lies in its ability to continually innovate through new verticals. Following its PR fallout, Robinhood continued to march, doubling down on their crypto initiative and adding in dividend reinvestment, fractional shares, and retirement options which have slowly rebuilt the company a brand-new image.
Robinhood listened to the crypto critics and built its own self-custody crypto wallet that meets the needs of everyday retail users and offers an on-ramp away from the platform. In fact, Vlad announced this wallet on my podcast. Just last week, Robinhood rolled out a global wallet for Android users that was previously only available for iOS users. The one thing I know about the crypto industry is that it's by no means an easy crowd to please. Even I have been critical of Robinhood in the past, but I can say now that the company is doing everything right.
Other recent changes in the company began in 2023 when Robinhood introduced traditional individual retirement accounts and Roth IRAs to its platform, a genius move to tie down millennial money on the platform as they begin to move into their prime earning years. Robinhood even matches 1% of eligible contributions that customers put into their IRA and the fees of rollovers are reimbursed, which goes to show how the lengths Robinhood will take for its customer.
The deals only get sweeter with Robinhood's Gold subscription service. I don't intend for this intro to all of a sudden come across as advertisement (it is NOT), but it's important to highlight these moves because they show the company is in a healthy position. The plan is $5 a month or $50 a year, the perfect price range for retail, and offers a credit card with 3% cashback on every eligible purchase, 5% cashback on purchases through the Robinhood travel portal, and 5% interest on your uninvested brokerage cash. All accrued points can be redeemed directly into investments, which is quite innovative and further solidifies Robinhood's appeal to retail investors. Additionally, Robinhood offers a 1% deposit boost on any amount at all times.
These offers are seriously hard to beat elsewhere.
Where things really get crazy is that Robinhood Gold member who take advantage of the retirement options on the platform can enjoy a 3% IRA match on eligible IRA contributions to their Robinhood IRA account. You might be thinking, is retail really taking advantage of this? The answer is YES, they are. Vlad Tenev shared on CNBC yesterday morning, "It took us about a year to go from $0 to $1.5 billion in retirement assets on our platform. Yesterday, we crossed $4 billion in retirement assets. So, it took us under 90 days to go from $1.5 billion to $4 billion after taking 12 months to get to the first $1.5 billion." At this pace, you can only imagine how many billions Robinhood scoops up by the end of 2024 and through the next decade.
Robinhood's performance in the fourth quarter was notably robust, with net revenues rising by 24% year-over-year to $471 million. This growth was fueled by higher net interest, transaction-based, and other revenues. The company reported a net income of $30 million, or $0.03 per share, a substantial improvement from the net loss of $166 million, or -$0.19 per share, in the fourth quarter of 2022. Adjusted EBITDA also saw a significant increase, climbing 62% year-over-year to $133 million.
For the year as a whole, 2023 recorded a revenue of $1.9 billion, up 37% year-over-year.
Overall, I view Robinhood through a similar lens to how I view Coinbase. If Coinbase is the pure play on everything crypto, Robinhood is a pure play on everything retail. Despite the setbacks, millennials prefer Robinhood over its competitors, and the cohort of investors they have captured have proven to be fast-growing and loyal. None of this is investment advice, but I think the bottom line for Robinhood comes down to its executives' ability to manage the risks of expansion, stick to their innovative core, balance their PR, and roll with the punches as they come.
While everyone is discussing how well Coinbase is expected to perform in the next earnings report due to the increase in crypto trading volume, there is little talk about how Robinhood is positioned to benefit from the same trend. Not to mention, Cathie Wood, aka ‘The Queen of Retail,’ has a strong affinity for Robinhood, making it her 7th largest position overall, with a 3.27% stake in the company - Cathie Wood loves the Hood.
Am I allowed to make that joke? Who knows, sue me.
I hope you liked this intro; it wasn't one of my typical ones, but it was fun to write about because the story is compelling. From a non-investment, educational, and entertainment standpoint, I see the Robinhood vision.
* If you are considering an investment, always seek out a professional opinion. *
Bitcoin Thoughts And Analysis
Bitcoin is CHOPPY at the moment. Not much to analyze, in my opinion. You know where I stand from sharing charts every day. It’s a bull market, buy dips, $69,000 is key!
Altcoin Charts
For those who are new here, I share SETUPS and not SIGNALS. These are ideas that I am watching - if a certain thing happens, then the trade triggers. I am not telling you what to buy or when. I am showing you how I am watching certain charts and what has to happen for me to take a trade.
I shared the breakout on this coin yesterday. Price continued up significantly, to around $2.18. Breakout traders were rewarded, but the safer strategy is always to wait for a retest of the previous resistance as support - in this case the previous all time high. That came overnight, with a PERFECT tap of support at $1.97.
There are no guarantees in trading, but a flip of resistance to support at an all time high is about as good as it gets. If you were waiting yesterday or set bids around that line, then you filled and are in a decent spot.
Wick and I also discussed SUI at length yesterday, looking at it through Trading Alpha. Spoiler, he independently loved this setup as well.
Legacy Markets
Global stocks are on track for a second consecutive quarterly gain, hitting new records as investor optimism grows, fueled in part by central bank reassurances on upcoming rate cuts. The Stoxx 600 Index in Europe rose 0.3% to a new high, while U.S. futures indicated a modest opening after the S&P 500 also reached its highest level ever. The focus is now on upcoming U.S. jobless claims data.
The MSCI global stocks index is set to rise over 7% this quarter, driven by rallies in the U.S., Japan, and the artificial intelligence sector, nearing its all-time high. However, movements were subdued as institutional investors may be rebalancing portfolios at the quarter's end.
In the bond market, Treasury yields rose following comments from Fed Governor Christopher Waller, suggesting a cautious approach to interest rate cuts pending more favorable inflation data. This stance has led to a strengthening dollar against most major currencies, with the yen stabilizing after hitting a 34-year low against the dollar.
Investors are awaiting the release of the Fed’s preferred inflation measure, the core personal consumption expenditures price index, with markets closed on its release day, making them hesitant to take bold positions beforehand.
Concerns have been raised about the potential for short-term profit-taking in stocks, given the significant rise since late October and the possibility of being caught on the wrong side of the momentum trade.
In commodities, oil prices are on the rise, heading for a strong quarterly gain amid expectations that OPEC+ supply cuts will tighten the global market. Gold prices have stabilized after a three-day rally.
Key events this week:
UK GDP revision, Thursday
US University of Michigan consumer sentiment, initial jobless claims, GDP, Thursday
Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday
US personal income and spending, PCE deflator, Friday
Good Friday. Exchanges closed in US and many other countries in observance of holiday. US federal government is open.
San Francisco Fed President Mary Daly speaks, Friday
Fed Chair Jerome Powell speaks, Friday
Stocks
S&P 500 futures fell 0.1% as of 5:37 a.m. New York time
Nasdaq 100 futures fell 0.2%
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 0.3%
The MSCI World index was little changed
S&P 500 futures fell 0.1%
Nasdaq 100 futures fell 0.2%
The MSCI Asia Pacific Index fell 0.5%
The MSCI Emerging Markets Index rose 0.2%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.4% to $1.0782
The British pound fell 0.4% to $1.2593
The Japanese yen was little changed at 151.42 per dollar
The offshore yuan fell 0.1% to 7.2637 per dollar
Cryptocurrencies
Bitcoin rose 2.6% to $70,627.7
Ether rose 1.9% to $3,577.7
Bonds
The yield on 10-year Treasuries advanced three basis points to 4.22%
Germany’s 10-year yield advanced two basis points to 2.31%
Britain’s 10-year yield advanced three basis points to 3.96%
Commodities
West Texas Intermediate crude rose 0.4% to $81.69 a barrel
Spot gold was little changed
Making Money With AI Trading Algo | $10,000 Portfolio | The Bitcoin Cheat Code
I am filming a brand-new show called “Making Money” every Tuesday at 3pm EST joined by Andrew Parish and Tillman Hollow from The Arch Public team. On this show, we invest a $10,000 portfolio in stocks with a high-frequency AI algorithm developed by Arch. Every week we track and update the performance of the algorithm and discuss the results. We also give alpha on the market and advance info on what’s coming from regulators and institutions.
Check out The Arch Public HERE.
Fidelity Files For A Spot ETH ETF And More
Recent developments in the Ethereum ETF applications, particularly from Fidelity, merit clarification. Unlike other applicants, Fidelity submitted its Form 19b-4 to the SEC in November 2023 but only recently filed the S-1, a necessary step that other contenders had previously completed. The S-1 form is crucial for registering the ETF and offering detailed disclosures to investors. Conversely, the 19b-4 form, filed by the exchange where the ETF seeks listing, demonstrates compliance with listing requirements.
With Fidelity's S-1 filing, the roster of Ethereum ETF issuers now includes notable names such as VanEck, ARK, Grayscale, Invesco, Fidelity, BlackRock, and Franklin Templeton. This lineup does not feature Bitwise, Valkyrie, and Hashdex, known participants in the Bitcoin ETF arena, indicating a distinct separation in the race for Ethereum ETFs.
A significant aspect of Fidelity's application is the inclusion of staking, signaling a robust confidence level that this feature could serve as either a strategic negotiation tool or a definitive component of the offering.
The industry's perception of the likelihood of an Ethereum ETF's approval also deserves attention, particularly in light of analysis by Eric Balchunas and James Seyffart. Their cautious stance could be shaping market sentiment, despite the presence of other experts with a more optimistic outlook. This discrepancy in expert opinions raises questions about the broader acceptance and impact of diverse analyses on investor sentiment.
In parallel, the introduction of a new spot Bitcoin ETF by Tidal and Hashdex, branded under the ticker DEFI, represents a significant advancement. Each new spot ETF opens doors to a unique investor base, fostering a positive trajectory for the sector.
Major Developments Unfold In Coinbase Vs. SEC
Let's clarify some widespread misunderstandings about Judge Failla's decision in the Coinbase vs. SEC case, focusing on the nuanced nature of legal dismissals and what this specific decision implies.
Firstly, it's essential to understand that dismissals in court cases, especially in complex regulatory disputes, are not commonplace. Coinbase's aspiration to have the case entirely dismissed was ambitious, given that judges typically require a compelling lack of legal foundation to discard a case outright. Therefore, Judge Failla's decision to not dismiss the case in its entirety does not reflect a bias towards the SEC; rather, it signifies that the case possesses sufficient legal grounds to proceed to trial. This is a standard procedural step, allowing the SEC an opportunity to present its case in a court of law.
Importantly, part of the lawsuit was indeed dismissed—a notable victory for Coinbase. This dismissed claim pertained to Coinbase allegedly operating as an unregistered broker via its Wallet service. Nonetheless, the SEC's other allegations, including accusations of Coinbase acting as an unregistered securities intermediary and its staking program unlawfully engaging in securities sales and offerings, will move forward to trial.
This mixed outcome harbors both positive and negative implications. On the positive side, it paves the way for potentially undermining the SEC's stance in a significant manner as the trial advances into the discovery phase. The timeline for a verdict, possibly aligning with the conclusion of a bullish market cycle or extending beyond, remains uncertain due to the intricate nature of legal proceedings.
This case is not just a pivotal moment for Coinbase; it's a watershed for the entire cryptocurrency industry. The stakes are high, and there's a grounded optimism in the community regarding Coinbase's prospects. The sentiment isn't merely hopeful; it's based on the belief in a favorable outcome that could set a precedent for the regulatory treatment of crypto assets in the United States.
XRP Dump Ahead? Will Ripple Survive? Should You Withdraw Your Funds From KuCoin? | MetaLawMan
KuCoin has been charged with violating anti-money laundering laws by U.S. federal prosecutors, Ripple faces $2bn fine from the SEC, SBF can get 50 years in prison. A lot is going on in crypto and today I am talking to James Murphy aka MetaLawMan as we break down what is going on and why it matters.
Chris Inks will join in the second part to share some interesting trades in crypto and beyond.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
Wow. 🤩 great and thoughtful take on robinhood.
Excellent work ! Congrats.