The Wolf Den #993 - You Won't Believe This
Robinhood Vs. Coinbase
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In This Issue:
You Won’t Believe This
Bitcoin Thoughts And Analysis
Legacy Markets
Tether + Circle Own A Lot Of U.S. Debt
Bitwise Releases Its First ETH ETF Commercial
CertiK Returns The Stolen Funds
Raoul Pal: The Banana Zone Is Coming, Get Ready Now!
You Won’t Believe This
This is going to blow your mind.
I decided to compare Robinhood’s crypto business with Coinbase’s, and the results were astonishing.
To start, I evaluated the size of each company, determining how many times larger Coinbase is compared to Robinhood. Additionally, I considered the advantage Coinbase has as a dedicated crypto company, unlike Robinhood, which is a general-purpose broker platform.
Coinbase’s market cap is $56.23 billion, while Robinhood’s is $18.6 billion. This makes Coinbase 3.02 times larger than Robinhood. Based on this, it would be reasonable to expect Coinbase to achieve around 3.5 times the performance metrics of Robinhood.
However, the numbers reveal a shocking story, and I have the receipts to prove it.
Hood: Q1, 2024
“Crypto Notional Trading Volumes increased 224% year-over-year to $36.0 billion.”
“Transaction-based revenues increased 59% year-over-year to $329 million, primarily driven by cryptocurrencies revenue of $126 million,”
COIN: Q1, 2024
“Q1 consumer trading volume was $56 billion, up 93% Q/Q, outperforming the US spot market which increased 91% Q/Q.”
“We ended Q1 with $171 billion in assets under custody.”
Let me break this down for you.
Robinhood’s Q1 crypto transaction-based revenue was $126 million, generated from $36 billion in crypto trading volume.
Coinbase’s Q1 crypto transaction-based revenue was $935 million, from $56 billion in crypto trading volume.
How did Robinhood manage to capture a staggering 64% of Coinbase’s consumer trading volume? Despite being nearly one-third the size of Coinbase and not even a dedicated crypto exchange, Robinhood is gaining significant traction. Is retail choosing Robinhood over Coinbase? Are Coinbase's fees really that prohibitive?
Coinbase has a reputation for having the highest fees in the industry, and it likely also has the largest spread. Robinhood, aware of this, built a calculator on their platform for comparing the value of your dollars across different platforms. While I haven't fact-checked it, I assume it's accurate or mostly accurate.
Even crazier, look below.
In March of this year, during Bitcoin’s run to $74,000, Robinhood did $23.6 billion in volume, which was 42% of what Coinbase did the entire quarter.
Here’s what we know about the following months.
“Crypto notional trading volumes were $10.1 billion last month (April), down 57% from March’s volumes of $23.6 billion. It was still up 173% from the previous year’s period.”
“Crypto Notional Trading Volumes were $7.1 billion (down 30% from April 2024, up 238% year-over-year).”
Based on some rough calculations, Q2 trading volume is shaping up to be around $24 billion, with contributions from $10.1 billion, $7.1 billion, and possibly another $7 billion. While this is a decrease from the $36 billion seen in the previous quarter, it's still impressive given the current choppy and lackluster market conditions.
For context, $24 billion is just under half of Coinbase’s Q1 volume and might even exceed half of what Coinbase achieves in Q2.
These observations suggest several key points:
A) Robinhood is aggressively targeting retail crypto traders.
B) Retail traders are gravitating towards Robinhood, especially during periods of heightened market activity.
C) Despite the potential for much higher profits, Robinhood has prioritized acquiring traders over immediate profit.
D) Robinhood is achieving these impressive numbers despite having significantly lower assets under custody—$26 billion compared to Coinbase's $171 billion—and focusing solely on retail.
E) Robinhood's crypto division is uniquely positioned for substantial growth, as demonstrated by its recent acquisition of Bitstamp and the launch of a new crypto trading API for U.S. customers.
As many of you know, I’ve been a strong advocate for COIN, talking about it non-stop since it was priced at $40 per share. Even now, in the mid-$200s, I believe it’s still undervalued. Clearly, Coinbase is doing something right, growing and generating substantial revenue from its trading volume. When the bull market heats up, COIN is bound to see a significant uptick.
But HOOD stock is a different story. Robinhood is playing a unique game, focusing on acquiring customers as cheaply as possible. This strategy is poised to pay off massively when interest rates drop, crypto surges in the second half of the year, and retail investors flood back into the crypto market, inevitably choosing Robinhood.
HOOD is perched next to barrels of TNT if crypto unfolds as many anticipate. Furthermore, the platform’s reputation has made a complete 180-degree turnaround and it’s not priced in. Wall Street may not have forgiven them yet, but holding grudges has never been a profitable strategy.
As always, this letter is for entertainment and educational purposes ONLY. Nothing here constitutes financial advice. Please consult a licensed professional before making any financial decisions.
Bitcoin Thoughts And Analysis
We know what is going on - chop, pain, liquidations for no reason. There is NOTHING TO DO HERE, regardless of the charts. Investors should continue to dollar cost average with a long time horizon. Traders should wait for better conditions.
If you are curious about the divergences for fun…
We had bullish divergence, hidden bearish divergence (red) which signals the bullish divergence is “over,” and now potential bullish divergence again, which will take many hours to confirm or fail.
Great signal for short term traders right now, but the high time frames show nothing meaningful.
Legacy Markets
Amid a risk-off mood, bonds gained favor following disappointing PMI data from Europe’s two largest economies, which missed expectations and pushed Germany's 10-year bond yield down by seven basis points. Similarly, US Treasury rates also saw a decline. Meanwhile, the AI stock rally showed signs of fatigue after a record weekly inflow of $8.7 billion into tech funds. The dollar remained near its 2024 high, reflecting ongoing concerns about French political risk and its impact on growth. Traders now predict a second European Central Bank rate cut by October, with an 80% chance of a third cut by the year's end, up from 65% just a day earlier.
French President Macron’s unexpected call for a snap election has heightened market volatility and increased investor anxiety over a potential economic rebound being jeopardized by the rise of far-right leaders. This political uncertainty has led European stock funds to suffer their fifth consecutive week of outflows, according to Bank of America strategists, citing EPFR Global data. Benoit Peloille, chief investment officer at Natixis Wealth Management, emphasized the risk posed by the uncertain economic outlook for the eurozone.
The Stoxx 600 Index extended its declines, while US futures were slightly lower ahead of the triple-witching options expiration day. This event, which occurs when derivatives contracts tied to equities, index options, and futures mature simultaneously, is expected to see about $5.5 trillion in contracts expire, compelling traders to roll over positions or start new ones. This added to the market's cautious tone, with the AI-driven rally showing signs of waning after a period of substantial growth.
Key events this week:
S&P Global Services PMI, Friday
US existing home sales, Conf. Board leading index, Friday
Fed’s Thomas Barkin speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.7% as of 11:59 a.m. London time
S&P 500 futures fell 0.1%
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average fell 0.1%
The MSCI Asia Pacific Index fell 0.6%
The MSCI Emerging Markets Index fell 0.8%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.2% to $1.0681
The Japanese yen was little changed at 159.01 per dollar
The offshore yuan was little changed at 7.2894 per dollar
The British pound fell 0.2% to $1.2633
Cryptocurrencies
Bitcoin fell 1.8% to $63,866.55
Ether fell 0.8% to $3,494.21
Bonds
The yield on 10-year Treasuries declined three basis points to 4.23%
Germany’s 10-year yield declined seven basis points to 2.36%
Britain’s 10-year yield declined two basis points to 4.03%
Commodities
Brent crude was little changed
Spot gold rose 0.1% to $2,363.31 an ounce
Tether + Circle Own A Lot Of U.S. Debt
Did you know that the treasuries held by Tether ($91 billion) and Circle ($29 billion) combined exceed those held by Germany ($101 billion) and South Korea ($103 billion)? The top holders of U.S. debt are Japan, at just over $1 trillion, and China, at $867 billion, representing 14.7% and 11.9% of the total share, respectively. If the size of stablecoins were factored into the total share, they would collectively own about 1.6%. Considering the potential for debt to balloon over the next five years, it seems prudent for Tether to explore gold as a reserve.
Bitwise Releases Its First ETH ETF Commercial
The commercial is a witty skit featuring Ethereum, portrayed as an energetic young man, and Big Finance, depicted as a tired older man. They discuss the “long day” Big Finance had between 9:30 AM and 4:00 PM. Big Finance boasts about the billions he moved around the world, while Ethereum, brimming with energy, proudly shares that he did the same with stablecoins, NFTs, and loans, thanks to his 24/7 accessibility. The skit concludes with a punchline: both characters realize tomorrow is Saturday, and traditional markets will be closed, while Ethereum continues operating non-stop..
CertiK Returns The Stolen Funds
If I had to speculate, the extensive media coverage of CertiK's poor decision-making likely pressured them to return the funds and abandon their questionable scheme. Kraken was wise to come forward with a highly detailed account of the events before CertiK did and publicly threaten legal and criminal action to recover the funds. While there is still some dispute over a small portion of the funds, Kraken has announced that the situation is largely resolved. Thankfully, the industry has learned a valuable lesson, and Kraken avoided a multi-million dollar hit..
Solana Is Getting An ETF
There it is, step one. It seems like just about everything that happens in Canada eventually makes its way to the U.S. An ETF for Solana appears inevitable; it's just a matter of timing. Yesterday, 3iQ filed to launch the first Solana ETF in Canada with the ticker $QSOL. According to the article, "The Fund aims to provide unitholders with the daily price movements of SOL, long-term capital appreciation, and staking yield. 3iQ has a history of digital asset innovation, including the first publicly traded Bitcoin and Ether funds in Canada." While we might anticipate a similar move in the U.S., it's worth noting that the SEC still considers Solana a security in an ongoing lawsuit. If there is anything Solana holders should be rooting for right now, it's a successful ETH launch. If ETH does well, issuers will look for the next big thing.
Raoul Pal: The Banana Zone Is Coming, Get Ready Now!
When will the bananas finally ripen? Raoul Pal, the CEO and Co-Founder of Real Vision, believes bananas will ripen in the fall. Today, we are discussing bananas and some crypto. Don't miss this conversation!
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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.