Robinhood to buy crypto exchange Bitstamp in effort to expand globally

In a move that could change the cryptocurrency trading landscape, popular stock trading app Robinhood (HOOD) on Thursday announced a $200 million strategic acquisition of Bitstamp, one of the most established cryptocurrency exchanges globally.

While the deal will need regulatory approval before it is finalized, it signals Robinhood’s desire to become a major player in the world of digital assets.

Robinhood’s big investment in global crypto trading

With a price tag of $200 million, the acquisition of Bitstamp is Robinhood’s largest deal to date.

Currently, Robinhood allows users to buy and sell a limited number of cryptocurrencies within its app. While convenient for existing customers, this approach has made it difficult for Robinhood to compete in the broader cryptocurrency market.

The acquisition of Bitstamp has the potential to change this. By integrating Bitstamp’s exchange functionality, Robinhood is able to offer its users a much wider selection of cryptocurrencies.

Founded in 2011, Bitstamp is one of the first and most established cryptocurrency exchanges. It has approximately 4 million individual and institutional investors, mostly in Europe, the UK and Asia. Bitstamp offers a secure platform for trading over 85 different cryptocurrencies, as well as lending and staking options.

In essence, the deal has the potential to establish Robinhood with international users as a platform where investors can manage traditional stocks and options alongside their favorite digital currencies. With no fees or commissions, a practice now common among brokers, pioneered by Robinhood.

Perhaps more importantly, Bitstamp has a strong reputation for regulatory compliance — it has more than 50 active licenses and registrations worldwide — a crucial factor for Robinhood as it seeks to expand its own crypto operations.

Robinhood’s stock and revenue performance

Robinhood’s stock price (HOOD) has more than doubled in 2024 from its January low. Shares were trading at $21 on June 6.

The company also had a solid earnings report in the first quarter; total net revenue reached $618 million, an increase of 40 percent compared to the previous year. Net income increased to $157 million on an annual basis.

According to the report, transaction revenue from cryptocurrency alone increased by 232 percent compared to the previous year, reaching $126 million. By comparison, Robinhood’s EPS was just $39 million during the same period.

Robinhood is diversifying in other ways, too. The company highlighted that during Robinhood’s 3 percent transfer IRA promotion between January and April 2024, customers transferred more than $4 billion in retirement assets from brokerage competitors, averaging over $90,000 per customer.

The story continues

What investors should consider about Robinhood

The ink is not yet dry on the Robinhood-Bitstamp deal. Regulatory approval is ahead of us and a closing date is not expected until the first half of 2025.

According to a June 6 statement, Robinhood and Bitstamp customers “can expect the same level of service, security and reliability” as the two companies continue their agreement.

But what about the public company’s investors? There are a few factors you should consider about HOOD in the coming months.

Robinhood’s growth potential: The successful integration of Bitstamp and expanded crypto offering could lead to a significant increase in Robinhood’s user base and create new revenue streams. This type of growth can have a positive impact on the company’s stock price in the long run.

Regulatory environment: The cryptocurrency market continues to be subject to ever-evolving regulations. Investors should be aware of potential hurdles that could impact or delay the deal or hinder Robinhood’s future crypto ambitions.

Competition: The crypto exchange space is competitive. Robinhood will need to work hard to differentiate itself and draw users away from established players like Coinbase and Binance.

In conclusion

The planned acquisition of Bitstamp marks an important step for Robinhood as the company aims to gain a larger share of the cryptocurrency market. The deal has the potential to position Robinhood as a leader by offering users a broader range of crypto assets.

But success will depend on Robinhood’s ability to navigate regulatory uncertainties, effectively integrate Bitstamp, and stand out from the competition.

Learn more: Most popular types of cryptocurrencies

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Investors are also advised that the past performance of an investment product is no guarantee of future price appreciation.