After-hours trading on Wednesday saw a nearly 7% decline in shares of Robinhood after the online broker announced a profitable quarter for the first time as a publicly traded firm, but witnessed a decline in monthly active users, dealing a blow to its crypto balances.

The decline in active users cost Robinhood’s cryptocurrency trading business $31 million in the second quarter. In comparison to the $38 million that the company made in the first three months of this year, this amount represents an 18% drop, according to its most recent financial announcement.

Robinhood, which was formerly lauded for its innovative strategy of democratizing stock trading by doing away with trading commissions, has had to adjust to shifting market dynamics, which have also had a substantial influence on its cryptocurrency revenue.

The online brokerage that went public in 2021 has had a loss of almost 47% year over year, marking a record low. This drop can be linked to a number of things, such as heightened competition, problematic regulations, and changes in user behavior.

The substantial effect that this has had on the firm’s crypto earnings is one prominent part of this influence. The company’s ability to make money from crypto trading was negatively impacted as a result of the changing market trends and regulations around cryptocurrency.

Given that Robinhood has expanded to include bitcoin trading in addition to standard stock trading, this is very pertinent. For its revenue streams, the evolving nature of the cryptocurrency market—characterized by increased volatility and regulatory scrutiny—have brought both opportunities and challenges.

Robinhood reported a net income of $25 million, or 3 cents per share, on $486 million in revenue. According to FactSet consensus estimates, analysts anticipated a loss of 1 cent per share on sales of $473 million.

In 2018, Robinhood began allowing users to purchase and sell digital assets, initially allowing only Bitcoin and Ether, the native cryptocurrency for Ethereum, to be traded.

The organization advanced significantly over time by diversifying its token offerings to include a total of 18 unique cryptocurrencies. The addition of a number of crypto-focused products to their lineup supported this strategic move.

In particular, Robinhood released a user-friendly wallet in April 2022, giving users a safe and convenient way to keep their digital assets. The business’ dedication to innovation was further demonstrated by the recent disclosure of a programming interface.

In spite of the crypto revenue losses, Robinhood saw a 13% increase in total assets under custody to $89 billion last quarter thanks to “higher equity valuations and continued net deposits.”

Meanwhile, Robinhood’s total cryptocurrency holdings climbed from $8.431 billion at the end of 2022 to $11.503 billion in the middle of 2023.

Featured image from Getty Images/iStockphoto

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