A visual representation of the digital cryptocurrencies Dogecoin and Bitcoin.
Yuriko Nakao | Getty Images News | Getty Images
Robinhood, the company that popularized stock trading in recent years, saw such growth in Dogecoin transactions this year that it included a specific risk in its cryptocurrency-linked IPO prospectus.
The company announced in its IPO filing on Thursday that the meme-inspired token accounted for 34% of its cryptocurrency transaction-based revenue in the first quarter. That’s a 4% increase in the fourth quarter.
Much of that growth coincided with a spate of tweets about Dogecoin from Tesla CEO Elon Musk, who said “Release the Doge!” On Thursday.
Dogecoin revenue accounted for 6% of the company’s total revenue during the reporting period, while crypto accounted for 17%. The trading app offers seven different digital coins, including Bitcoin, Ethereum and Litecoin.
Robinhood said its business could be adversely affected “if the Dogecoin markets worsen or the price of Dogecoin falls, also due to factors such as a negative perception of Dogecoin or the increased availability of Dogecoin on other cryptocurrency trading platforms”.
Crypto trading, which was first introduced on Robinhood in 2018, has seen a lot of growth in recent years. Robinhood makes money on crypto by routing orders to market makers that the company says offer “competitive prices” and takes a percentage of the order value.
Overall, crypto assets on the platform rose from $ 480.7 million year-over-year to $ 11.6 billion in the first quarter. Total revenue for the period increased 309% to $ 522 million from $ 128 million a year ago.
But the scaling has proven to be problematic at times, according to the submission. For example, service failures and deteriorated service in times of high crypto trading volumes were sometimes an issue in mid-April and early May.
Much like PayPal, which doesn’t allow its customers to transfer crypto holdings to other digital wallets, Robinhood doesn’t allow users to withdraw or withdraw cryptocurrencies in or out of the app, even though it said it had such a feature could add later.
Although Robinhood does not name competitors in the filing, the company admits that it operates in “highly competitive” markets alongside “discount brokers, established financial technology companies, venture financed financial technology companies, banks, cryptocurrency exchanges and asset management firms and technology platforms.”
In addition to PayPal, Coinbase, which went public earlier this year, and Squares Cash App are two popular services used by US consumers to buy and sell cryptocurrencies.
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