Robinhood Tests Dogecoin Wallet: Why It’s a Good Move

Popular trading app Robinhood (HOOD) is testing a Dogecoin wallet. The move comes about a month after the company’s third-quarter 2021 earnings release where it talked about the waitlist of 1 million members for its crypto wallet service.

Notably, the move is coming at a time when HOOD stock is trading near its all-time low. The stock has been weak and now trades at less than a third of its 52-week highs. Dogecoin also missed out on the recent crypto rally even as rival meme currencies like Shiba Inu have surged.

Robinhood tested dogecoin wallet

Christine Brown, chief operating officer for crypto at Robinhood said in a tweet that “Last week we sent our first alpha transfer from a Robinhood wallet to an external wallet.” She also attached the screenshot of the transfer. Meanwhile, the news did not have a positive impact on Robinhood stock as well as dogecoin and they both closed down in yesterday’s price action. HOOD stock was trading lower in today’s price action also.

Cryptocurrency

In the second quarter of 2021, cryptocurrency trading accounted for over half of Robinhood’s transaction-based revenues. However, the revenues contribution from cryptos fell to less than a fifth in the third quarter. This was mainly due to the falling popularity of dogecoin, which accounted for the bulk of the companies’ revenues in the second quarter. Dogecoin has been out of favor with markets as traders have pivoted to other meme currencies. Since Robinhood does not have many cryptocurrencies on the platform, and DOGE is the only meme crypto that if offers, it has lost out on crypto revenues.

Robinhood also saw higher attrition in the quarter and its users fell on a monthly basis in the quarter. Notably, HOOD is facing higher competition including from StockApps which was voted the best stock trading app for beginners.

Wall Street on HOOD stock

Some of the Wall Street analysts have also been turning bearish on HOOD stock. Last week, Deutsche Bank added it to a catalyst sell call while adding rival Charles Schwab to a catalyst buy call. “We think HOOD shares may continue to face near-term pressure, while we expect SCHW shares to continue to advance upon strong organic growth and investor sentiment for interest rates to rise,” Deutsche Bank said in its note. The bank also believes that markets overestimated HOOD’s growth outlook amid the meme stock rally.

Notably, Reddit group WallStreetBets, which was instrumental in the meme stock rally and triggered a short squeeze in many stocks, is not as lethal now. Also, at the height of the meme stock mania, Robinhood lost the trust and business of some of the retail traders after it blocked trading in meme stocks. It had to face the ire of irate traders who lost a lot of money due to Robinhood’s trading ban.

Earlier this month, HOOD also reported a security breach. That said, the company is now trying to diversify the revenue base and crypto wallets along with IRA are two growth areas that it is targeting.

Robinhood has only a few cryptos

Meanwhile, Robinhood only has a handful of cryptos on its platform which is a hindrance for crypto traders. Notably, Shiba Inu fans had started an online campaign to get HOOD to add SHIB also. However, the brokerage managed to resist the pressure.

Now, with dogecoin sagging in the low 20 cents and HOOD stock trading at all-time lows, the new wallet service might help both get some stream of positivity.