Robinhood, with a $70 Billion Market Cap, Saw Its Crypto Trading Revenue Lag Behind Hyperliquid
- Core Insight: Robinhood's cryptocurrency business revenue in Q1 2024 fell approximately 47% year-over-year to $134 million, trailing behind the $180 million in revenue generated by the decentralized exchange Hyperliquid during the same period. High promotional costs for the "Trump account" caused Robinhood's stock to drop nearly 10% after hours, sparking a discussion on how to reasonably value DeFi projects with strong profitability.
- Key Elements:
- Robinhood's Q1 crypto trading revenue was $134 million, down 47% year-over-year; notional trading volume was $24 billion, down 48% year-over-year.
- Hyperliquid's crypto trading revenue during the same period was close to $180 million, surpassing Robinhood, although both entities saw revenue decline by over 30%.
- Robinhood's overall net profit for Q1 was $346 million, while Hyperliquid's total protocol revenue was approximately $192 million, with an estimated net profit that could be substantial (over half of Robinhood's).
- Robinhood's price-to-earnings (P/E) ratio based on Q1 data exceeds 50x, while Hyperliquid's is less than 30x (if calculated by its FDV, its valuation reaches $39 billion).
- Point of Contention: Hyperliquid, as a DeFi project, benefits from light regulation, no tax pressures, and unlimited leverage ratios. However, its token holders lack shareholder rights, making valuation challenging.
Original Author: Eric, Foresight News
In the early hours of April 29 Beijing time, Robinhood announced its first-quarter financial results after the US stock market closed.
Robinhood's cryptocurrency-related revenue for the first quarter was $134 million, with in-app notional trading volume reaching $24 billion, down 47% and 48% year-over-year, respectively.
Despite the decline in cryptocurrency trading data, Robinhood made up the shortfall in other areas. The company's overall transaction revenue for the quarter increased 7% year-over-year to $623 million, primarily driven by a 320% surge in event contract revenue. Additionally, revenue from options and stocks stood at $260 million and $82 million, up 8% and 46%, respectively.
Overall, Robinhood reported Q1 revenue of $1.07 billion, a 15% increase year-over-year; net profit was $346 million, up 3% year-over-year. While not spectacular, the overall single-digit growth was acceptable, especially as the cryptocurrency trading data, which had been driving the stock price, nearly halved.
But the real reason for Robinhood's stock price plummeting nearly 10% in after-hours trading was the high expenses incurred for promoting the "Trump Account."
Robinhood stated that the company's expenses jumped 18% in the first quarter and warned that its "Trump Account" promotional plan would require an additional $100 million investment. Furthermore, Robinhood mentioned that the contracts for such accounts are based on a cost-plus model, resulting in lower profit margins.
This so-called "Trump Account" is an account established for American children under the "Big and Beautiful Bill Act," with Robinhood serving as the broker and initial trustee.
For a company with one foot in the crypto space, the discussion point on CT was not the stock price or performance, but rather that the once-popular brokerage firm's revenue from its cryptocurrency business couldn't even surpass that of Hyperliquid.
An analyst at Blockworks, who goes by shaunda devens on X, used a chart to visually demonstrate the data comparison between Robinhood and Hyperliquid.
Due to business diversification, many metrics are not directly comparable. However, in cryptocurrency trading, although both Robinhood and Hyperliquid saw their Q1 revenues decline by over 30%, Hyperliquid's revenue from crypto trading approached nearly $180 million, while Robinhood's was only $134 million.
In terms of overall profit, Robinhood's Q1 net profit was $346 million, while Hyperliquid's total protocol revenue was approximately $192 million. Although Hyperliquid's cost structure is unknown, it's likely not very high, meaning its net profit could easily reach over half of $346 million.
Many of Hyperliquid's supporters on X believe that Hyperliquid is being severely undervalued. Robinhood has a significantly larger user base than Hyperliquid and also charges higher fees.
Even under these circumstances, Robinhood's estimated price-to-earnings ratio based on Q1 data exceeds 50 times, while Hyperliquid's is less than 30 times.
Another researcher at Blockworks raised some questions about this, noting that Hyperliquid's token FDV has reached $39 billion. If this figure is used for calculation, everything seems to make sense.
Opponents argue that using FDV to value a project is like using Robinhood's future potential stock issuance to value Robinhood. A user going by the X handle "链上化学家" (On-Chain Chemist) also stated that valuation has always been an art, not a science.
How to value an on-chain project has always been a topic worth discussing. DeFi projects like Hyperliquid are relatively easier to value among on-chain projects, often by drawing analogies to brokerage firms in the stock market to arrive at a vague range. The reason it's called "vague" is because deep analysis is difficult.
DeFi projects face loose regulation, have no taxable pressure, and have unrestricted leverage, satisfying speculative demand to some extent. However, understanding the patterns of this speculative demand is the core reason why it's hard for the current market to estimate a project's future revenue.
Furthermore, the relationship between a project's token and the project itself is not clearly defined. Buying Robinhood stock makes you somewhat of a shareholder, but buying Hyperliquid tokens doesn't seem to confer any real power over the Hyperliquid project itself.
Settling transactions on-chain is a major advancement brought by Web3 to the world. In the future, we may continue to see cases like Hyperliquid, where profitability surpasses that of traditional companies. But how to value these emerging platforms may, as mentioned earlier, be an art, not a science.
