The analysts from investment bank giant JPMorgan said that Robinhood’s stock could actually receive a hit as big as a 20% drop in value, as the meme stock craze is dying down.
The Robinhood app allows investors to buy stocks and cryptocurrencies easily and quickly. It has been particularly popular with young and non-professional investors.
The app’s download and active user metrics have fallen massively this quarter, dropping 78% and 40% respectively, the analysts noted. Robinhood is not alone: crypto exchange apps Coinbase and Binance downloads also have fallen by around 50%.
Robinhood had an explosive start of the year, it became very popular among cryptocurrency traders. The app announced in April that 9.5 million of its customers traded crypto in Q1 of 2021, a 458% spike from Q4 of 2020.
“Meme stocks” such as GameStop and AMC were also popular on the app. Earlier this year a group of amateur traders pushed the stock price of dying video game retailer GameStop up, losing Wall Street bigwigs loads of money in the process.
But Robinhood has had its issues. The company went public in July but experienced the worst debut for an IPO of its size, with shares dropping 8.4% to $34.82 from their opening price of $38.
US regulators’ heavy handed crypto approach reached to the trading app’s activity as well. The company in June was hit with a $70 million fine over “widespread and significant harm suffered by customers.”
The fine is the biggest ever issued by the Financial Industry Regulatory Authority (FINRA), and it was due to misleading communications, system outages, and inappropriate customer approvals for complicated trades.
The analysts site these troubles, along with the falling price of Bitcoin and other cryptos since Q1, are part of the reason less people are using the app. Although the started Q4 which is historically bullish can change everything.
Source: Robinhood Trading App User Downloads Plummet 78% – Fintechs.fi