Crypto fans were loading up on Shiba Inu (SHIB +2.71%) after Robinhood Markets (HOOD 3.25%) announced trading availability on Monday morning. The token initially soared as much as 30% on the news, and 12 hours later Shiba Inu was still trading a healthy 17% above where it was when the news broke.
It's obviously not bad news for Shuba Inu to find its way onto a new exchange. It also helps that Robinhood only had seven digital currencies available before adding four new denominations, including Shiba Inu, on Tuesday.
I'm still not convinced that the initial rally will stick. Let's go over some of the reasons availability on Robinhood isn't a game-changer for Shiba Inu fans.
Image source: Getty Images.
1. Robinhood isn't as relevant as you might think
There's no denying that Robinhood Markets shook up the brokerage industry a couple of years ago. Would most of the leading platforms be offering commission-free trading otherwise? The problem now is that the platform has lost its grip on its young trading base.
Robinhood lost traction as 2021 played out. There's no shortage of metrics that prove it.
- The number of monthly transacting users slipped from 21.3 million in the second quarter to 18.9 million in the third quarter, and then 17.3 million in the fourth quarter.
- Average revenue per user has fallen in three consecutive quarters. Robinhood has gone from generating $137 per user during the first quarter to $64 in the fourth quarter.
- Assets under custody were lower by the end of the year than where they were at the midpoint of 2021.
The pressure points are everywhere. Fewer people are trading, and people are trading less. That's a bad look for a trading platform, and we haven't even gotten to the most problematic metric.
Robinhood isn't just about crypto. It's also a hotbed for options and stock trading. Stock and options trading has held fairly steady through the final three quarters of 2021, but the same can't be said for crypto. Robinhood reported transactions-based crypto revenue of $233 million in the second quarter, followed by $51 million in the third and $48 million in the fourth quarter. Put another way, Crypto transactions revenue went from 52% of Robinhood's business in the second quarter to just 18% by the end of the year.
CRYPTO: SHIB
Key Data Points
2. Every spike is different
If being added to Robinhood's select number of crypto choices is so praiseworthy, shouldn't all of the digital currencies added to Robinhood experience the same pop? In the same 12 hours of Shiba Inu's 17% ascent, two of the three other cryptocurrencies rose less than 4%. One has a higher market cap than Shiba Inu, and the other one is lower.
Is there any reason for Shiba Inu to be the one to surge higher? Is it just because Shiba Inu's a meme coin? There is a bullish case to be made for Shiba Inu; I'm just pointing out that Tuesday's pop is more based on hype than on the sustainable merits accorded to a crypto that's been added to Robinhood. You might also want to check in on the uninspiring returns from some of the seven cryptocurrencies that have been trading on the platform for longer.
3. It's too late for Robinhood to be taken seriously in crypto
Robinhood is trying to make up for the lost time it squandered. It's finally rolling out a crypto wallet to make its digital currencies easier to move away from the platform, but as we've seen in recent quarters, crypto traders have already cleared out.
Investors are smart enough to see through the "free" crypto trading that Robinhood offers, and the folks sticking around the once trailblazing platform tend to be small players these days. Having Shiba Inu coin now available is not detrimental to the crypto, but it's also not going to matter beyond Tuesday's initial buzz.
