Robinhood Is a Bitcoin Whale. What It Means for the Stock.

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Robinhood

Markets owns one of the largest

Bitcoin

wallets in the world, according to blockchain analytics firm Arkham Intelligence, the latest sign that the discount brokerage has become a major player in the fight for crypto traders.

As of Monday, the wallet contained about $3.1 billion worth of Bitcoin, likely on behalf of Robinhood’s customers. That probably represents the bulk of Robinhood’s holdings in the token. At the end of June, Robinhood’s customers owned about $4.2 billion in Bitcoin, along with another $7.3 billion in other cryptocurrencies such as

Ether

and

Dogecoin
,
the company said in its earnings report earlier this month.

A Robinhood spokesman confirmed in an email the wallet identified by Arkham Intelligence holds Bitcoin on behalf of the firm’s customers.

The large holdings underscore that Robinhood has become one of the primary venues for crypto trading in the U.S. They indicate that it has likely been grabbing market share as other players—such as FTX US and Binance.US—have blown up or stepped back from the U.S. market.

Robinhood took about 4 percentage points in crypto trading market share from

Coinbase Global

(COIN) in the second quarter and seems to have won even more in July, according to a research note earlier this month by

Mizuho

analyst Dan Dolev. He rates Robinhood at Buy with a target of $15 for the price.

On Monday, Robinhood stock was up 0.1% to $10.55.

Robinhood executives say they think their share is increasing because of low trading costs. “At Robinhood, you get more crypto for your dollar than most of our competitors,” CEO Vlad Tenev said on a call this month to discuss the company’s earnings results. “I think we’ve started to do a better job communicating that in the user interface.”

Of course, crypto trading overall has dragged in 2023 because prices have been stagnant and investors are less interested. Robinhood said that for the second quarter, it earned about $31 million in revenue related to crypto transactions, down from $58 million in the second quarter last year. That is more than it earned from equities-related transactions, but a fraction of the $127 million it made from options.

The fees Robinhood and other firms collect from each crypto trade they handle will likely shrink in response to competition from other brokerages like Fidelity and Interactive Brokers (IBKR). But the fact that Robinhood has become such a major player in crypto during the downturn means it would be in a good position if trading picks up again.

Write to Joe Light at joe.light@barrons.com