Shares of Robinhood Markets (HOOD 1.86%) rose this week as the company benefited from the recent crypto boom. Bitcoin (BTC -1.27%) reached its highest level in more than a year this week, surpassing $44,000 per token on hopes of a new Bitcoin ETF. The rest of the crypto sector broadly rose on these tailwinds and shrugged off the news Binancethe world’s largest cryptocurrency exchange, was fined more than $4 billion for failing to prevent money laundering on its platform, and founder Changpeng Zhao pleaded guilty to a crime and resigned as CEO.
Throughout its history, Robinhood’s success has been closely tied to crypto, and that relationship has been evident once again. As of Thursday’s close, Robinhood shares were up 23.2% this week, according to data from S&P Global Market Intelligence.
Robinhood is making a comeback
Bitcoin’s resurgence is bringing crypto investors back into the game, according to data from Robinhood.
In an after-market filing on Monday, the company said Robinhood investors made $1.4 billion in net deposits in November and that crypto trading volume was 75% above October levels.
That news sent Robinhood shares up more than 10% on Tuesday, and the stock continued to rise from there, gaining another 7% on even higher volume on Wednesday.
On Thursday, the stock gained 1.5% after launching crypto trading in the EU, a timely move given the recent surge in crypto prices. Robinhood offers buying and selling support for more than 25 cryptocurrencies and claims to have the lowest-cost crypto trading platform on average in the EU.
Will the upswing continue?
Bitcoin has pulled back slightly from its peak earlier this week, but the leading cryptocurrency could easily swing again, especially if news of a potential ETF emerges.
Robinhood’s business is closely related to interest in the stock market and crypto trading, and a continued crypto boom is likely to attract more investors back to Robinhood.
For example, Robinhood had 11.7 million monthly active users in 2020. That number rose to 17.3 million in 2021 due to the rise of crypto and growth stocks, but then fell to 11.4 million in 2022 as stocks and crypto crashed. Assets in custody also developed similarly.
There’s another reason why investors are excited about Robinhood. The company finally posted its first generally accepted accounting principles (GAAP) profit in the second quarter, benefiting from higher interest income and cost-cutting efforts.
In the third quarter, the company posted another loss, but the second quarter profit shows that the bottom line could increase if interest in cryptocurrencies continues to rise, as the company’s business model has a lot of leverage.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.