Commission-free trading app Robinhood disclosed that its financial status may be reliant on a cryptocurrency that began as a joke.
As it made the unusual move of releasing financial statements during its initial public offering (IPO) filing, Robinhood claimed that DOGE, which is a popular digital currency, accounted for 34% of its transaction-based income during the first quarter, up from 4% during the previous quarter.
Robinhood’s Success Tied to DOGE
It warned that possible sluggish demand of DOGE may have a negative impact on its financial performance.
In May of this year, at about 73 cents per coin, Dogecoin rose to prominence as it was supported by many prominent individuals, including Elon Musk, the CEO of Tesla. The use of Bitcoin and the Shiba Inu dog, behind the so-called Doge meme, were blended together to create a joke on Twitter.
Robinhood stated in an SEC filing,
A substantial portion of the recent growth in our net revenues earned from cryptocurrency transactions is attributable to transactions in Dogecoin.
If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected.
Dogecoin and other cryptocurrencies surged in April 2021, helped in part by Coinbase’s direct listing on April 14, despite the fact that the site did not provide Dogecoin trading.
Its price climbed to $0.10 on April 14 before hitting a new high of $0.45 on April 16 (up 400 percent in a week), with $70 billion in trading activity in the preceding 24 hours.
Dogecoin’s market valuation was nearing $50 billion, making it the sixth most valuable cryptocurrency, with a year-to-date increase of over 7,000 percent.
Robinhood’s Trading “Outage”
On April 15, an outage in electronic trading platform Robinhood’s cryptocurrency system was caused by “record demand,” prompting concerns among experts that the cryptocurrency sector is becoming a speculative bubble.
On May 4, 2021, the value of Dogecoin first surpassed the symbolic barrier of $0.50, a more than 20,000 percent increase in a year.
According to statistics from Coinbase, the meme currency has lately dropped to around 25 cents per coin, although the value is still up over 10,000% from a year ago.
In the first quarter of 2018, Robinhood said that bitcoin transaction-based revenue took up 17% of the company’s overall revenue, up from 3% a year earlier.
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