Robinhood, the platform that was once the raging crypto trading application, marked on Tuesday shares drop below its initial public offering (IPO) valuation after trading hours as revenues fell with key cryptocurrencies, such as Dogecoin.
The trading site is witnessing a change in its winds, as its long trail of investors are holding back their funds from the online brokerage due to a decline in user growth, and cryptocurrency trading halted in its last quarter.
Following the release of its Q3 results, Robinhood’s share price reached $36.10, below the initial offering of $38 from its July IPO.
For experts, the sudden shift in trading volumes did not come as a shocker as the sudden and harsh plunge in crypto trading was undeniably damaging, marking transactions revenues tumbling by 78 percent, fluctuating from $223 million from its second quarter (Q2) to $51 million in its third (Q3).
“For the three months ended September 30, 2021, we expect seasonal headwinds and lower trading activity across the industry to result in lower revenue and considerably fewer new funded accounts than in the prior quarter,” the company said in a statement.
The plaguing descent in crypto trading afflicted Robinhood’s total revenue per user by 42 cents, sending its shares down by almost 10 percent in after-hour trading, while transactions revenue fell by 41 percent, going from $451 million in Q2 to $267 million in Q3, according to FactSet data.
“If this quarter is a hint of what’s to come, in terms of volatility, I would expect sentiment and the valuation multiple to drop,” analyst at FBB Capital Partners, Mike Bailey, informed clients in a note.
“The Robinhood sales miss contrasts with the more favorable trading revenue for the big banks and brokers, which may have led investors to anticipate higher trading volumes for Robinhood,” he added.
The FinTech company’s quarterly net loss of $1.32 billion left its share valued at $2.06 per share. A factor that is massively credited to stock-based employee compensation with the rise of the IPO. During that time, Robinhood welcomed an estimate of 21 percent additional employees in Q2’s fiscal year, mostly in fields specializing in engineering, customer support, and compliance.
In its last quarter, Robinhood’s monthly active users plummeted from 22.5 million users to 22.4 million, with 660,000 new subscribers welcomed on the platform, dropping from 5 million in its Q2.
Earlier this month, the financial servicing company added a digital wallet platform, putting it in explicit competition range with globally renowned cryptocurrency venues, such as Coinbase.
Its cryptocurrency transaction volume, specifically with meme coin Dogecoin, denoted 62 percent of its total trading volume.
Now, even though Robinhood marked a damaging plunge in its Q3, over the last year, the company exponentially grew its transaction revenues maintained a heightened rise from last year’s quarter.
Coinbase adds tax center to platforms to report crypto taxes
Famous cryptocurrency exchange, Coinbase, uncovered plans to add its latest tax center on its platforms to assist U.S.-based customers in figuring out how much taxes they owe the IRS from their cryptocurrency transactions.
When tax day comes, the section will assemble every transaction made and put them all together into one space to facilitate their taxes.
While we might consider some of the leading cryptocurrencies on the market, such as Bitcoin and Ethereum, with the same monetary value as fiat money, the Internal Revenue Service (IRS) considers these decentralized assets as property with monetary value according to the federal agency’s FAQ.
Meaning, to the IRS, any type of cryptocurrency transaction will be considered as capital gains and losses and will be reported as such. In parallel, this also means keeping a record of the asset’s value when bought and sold throughout time.
Coinbase perceives that its new section will reveal “a personalized summary of [a customer’s] taxable activity on Coinbase, broken out over time by realized gains/losses and miscellaneous income.”
Then, this data can be shared with an accountant specializing in cryptocurrency and taxes or can even be implemented into tax software, such as TurboTax. Coinbase also accentuated that in case users were transferring crypto to external exchanges, wallets, or other decentralized finance (DeFi) services, users will also be able to receive tax reports covering an estimate of 3,000 transactions with CoinTracker, for free.
Customers can access the cryptocurrency exchange’s tax section from their account’s profile icon at the top right-hand corner of the interface. Once the “Taxes” shows on the menu item, users can access it and receive reports.
As for the application, users can access the Taxes section from the “Profile & Settings” menu – accessed from the top left of the application’s interface. Moreover, Coinbase is in the works to deliver written guidelines and assistance videos in the upcoming weeks to elaborate on how cryptocurrency and digital assets taxes works.
Swiss National Bank against issuing retail central bank digital currency
The Swiss National Bank does not see any overall benefit from issuing a central bank digital currency (CBDC) to be used by the general public and used in day to day transactions, governing board member Andrea Maechler said on Tuesday.
“We believe the risks outweigh the benefits,” Maechler told a financial conference held in Frankfurt, saying a retail CBDC meant central banks taking on the risks carried by the private sector and increased the risk of bank runs.
There also needed to be a balance struck between safeguarding privacy and the potential misuse of retail CBDCs in criminal activity, Maechler said.
Financial inclusion was also not a sufficient argument for CBDCs in Switzerland, Maechler said, with almost 100% of the country’s working population having access to bank accounts, while cash was still widely used.
“This does not mean the SNB is not interested in CBDC, but our focus is to look at the role that wholesale CBDCs could play,” Maechler said, referring to their use in transactions between financial institutions like banks.
The SNB last week said it has successfully used digital currency to settle transactions involving five commercial banks, and has also looked into how the technology can be used to improve cross-border payments..
Still, Maechler remained cautious.
“None of these projects are an indication that the SNB is ready to issue a wholesale CBDC,” she said.
Singapore bank issues guidelines to discourage crypto trading by public
The Monetary Authority of Singapore (MAS) on Monday issued guidelines that limit cryptocurrency trading service providers from promoting their services to the general public, as part of a bid to shield retail investors from potential risks.
Singapore is a popular location for cryptocurrency companies due to a comparatively clear regulatory and operating environment and is among the forerunners globally in developing a formal licensing framework.
But the city-state’s authorities have repeatedly warned that trading in digital payment tokens (DPT), or cryptocurrency, is highly risky and not suitable for the general public, as they are subject to sharp speculative swings.
The new guidelines clarify the expectations of MAS that companies should not engage in marketing or advertising of DPT services in public areas in Singapore or through the engagement of third parties, such as social media influencers, to promote DPT services to the general public.
They can only market or advertise on their own corporate websites, mobile applications or official social media accounts.
“MAS strongly encourages the development of blockchain technology and innovative application of crypto tokens in value-adding use cases,” Loo Siew Yee, MAS Assistant Managing Director (Policy, Payments and Financial Crime), said in a statement.
“But the trading of cryptocurrencies is highly risky and not suitable for the general public. DPT service providers should therefore not portray the trading of DPTs in a manner that trivialises the high risks of trading in DPTs, nor engage in marketing activities that target the general public.”
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