A visual representation of digital cryptocurrencies Dogecoin and Bitcoin.
Yuriko Nakao | Getty Images News | Getty Images
Robinhood, the company which brought stock trading to the masses, saw such growth in dogecoin transactions this year that it included a specific risk in is IPO prospectus tied to the cryptocurrency.
The company said in its IPO filing on Thursday that the meme-inspired token accounted for 34% of its cryptocurrency transaction-based revenue in the first quarter, compared to a year earlier. That’s up from 4% in the fourth quarter.
Much of that growth has coincided with a barrage of tweets about dogecoin from Tesla CEO Elon Musk, who on Thursday tweeted “Release the Doge!”
Dogecoin-derived income accounted for 6% of the company’s overall revenue in the period, while crypto made up 17%. The trading app offers seven different digital coins, including bitcoin, ethereum, and litecoin.
Robinhood said that its business could be hurt “if the markets for dogecoin deteriorate or if the price of dogecoin declines, including as a result of factors such as negative perceptions of dogecoin or the increased availability of dogecoin on other cryptocurrency trading platforms.”
Crypto trading, which was first introduced on Robinhood in 2018, has ballooned in the last few years. Robinhood makes money in crypto by routing orders to market makers that the company says offer “competitive pricing” and taking a percentage of the order value.
Overall, crypto assets on the platform multiplied by 25 times in the first quarter, year-over-year, from $480.7 million to $11.6 billion. Total revenue increased 309% in the period to $522 million from $128 million a year earlier.
But scaling has at times proven problematic, according to the filing. For example, partial service outages and degraded service during times of high crypto trading volume were an issue in mid-April and early May.
Similar to PayPal, which does not allow its customers to transfer crypto holdings to other digital wallets, Robinhood doesn’t let users deposit or withdraw cryptocurrencies into or out of the app, though it said it may add such a feature down the line.
While Robinhood doesn’t name any rivals in the filing, the company acknowledges that it operates in “highly-competitive” markets alongside “discount brokerages, established financial technology companies, venture-backed financial technology firms, banks, cryptocurrency exchanges, asset management firms and technology platforms.”
In addition to PayPal, Coinbase, which went public earlier this year, and Square’s Cash App are two popular services used by U.S. consumers to buy and sell cryptocurrencies.
