Robinhood had a net loss of $1.32 billion this past quarter, recording a plunge of 78% in revenue from crypto transactions from 2Q. Their shares dropped 12% to $34.80 at 9:46 a.m. in New York, $38 below the IPO price in late July, Bloomberg reported.

Robinhood Markets Inc. shares down to $34.80 on the daily chart – Source: Robinhood Markets Inc on TradingView

Analysts had estimated Robinhood Markets Inc. would have a total revenue of $423.9 million during an earlier Bloomberg survey, but the numbers fell short hitting only $364.9 million.

Vlad Tenev, Robinhood’s Chief Executive Officer, had predicted that the trading activity would tumble in the third quarter of 2021 and fewer accounts would open. As he stated during the Q3 Earnings Call, the tumbling numbers do not worry them since they have different short-term goals.

The fourth quarter might be falling short as their anticipation for Q4 is that “total revenue will be less than $325 million and full-year revenue will be less than $1.8 billion. At the top end, this implies full-year revenue growth of 85 percent.”, said Jason Warnick, Chief Financial Officer.

Warnick also reminded that they typically show a “seasonality curve that shows higher growth in the first quarter of the year versus the last three quarters.”, and further explained their Q3 focus on building a team:

We continue to make progress building our teams with increases primarily in engineering, customer service, and our regulatory, and compliance teams. In the quarter, we added 580 new full-time employees across the company, growing 21 percent sequentially versus Q2.

Warnick added that they are not worried about the near-term profitability, rather they feel safe about being “a profitable company over the long term.”

Robinhood’s Crypto Activity Drops-Off

In Robinhood’s report they show a big drop-off on their monthly active users (MAU) from 21.3 million in the second quarter to 18.9 million in this third quarter. Their crypto activity tumbled as well, as they had significantly fewer new funded accounts.

Many thought Robinhood would improve the way to invest in the crypto market. However, many wonder if they can meet with many of their clients interests, such as integrating new digital coins.

Related Reading | Strategist: Next Wave of Bitcoin Investors Likely to Come from Robinhood

Crypto activity and revenue plays a big role in Robinhood’s platform. Ever since they announced their intent to offer a crypto wallet, a waitlist of 1 million clients surged. On the potential growth that this project might bring, Tenev commented:

We actually believe that by rolling out wallets, we will go a long way toward addressing the primary pain point that customers feel right now.

Regulatory Requirements Vs. Crypto Platforms

Tenev stated during the Earnings Call that “the regulatory landscape is increasingly uncertain.” As they want to enhance their involvement in the crypto space, they also intend to watch over their platform and keep it safe by “introducing products that comply with legal and regulatory requirements.”

He explained that Robinhood is carefully looking into new virtual currencies, but they mantain the focus on meeting regulatory guidelines since they do not want another run-in

Related Reading | Robinhood Fined $70M For Causing “Significant Harm” To Customers

In a recent interview with Bloomberg, Blockchain Capital General Partner Spencer Bogart reacted to Robinhood’s tumbling numbers and suggested this drop-off aligns with the frustration that the historically unfriendly regulations from the U.S create for crypto platforms.

Bogart explains that “Historically, the U.S. has been so unfriendly to innovation in the crypto space that most platforms are forced to ban Americans.” According to his opinion, regulations have only worked against the American people’s freedom rather than being implemented in their favor.

For a country that is founded on the principles of freedom, growth, and innovation, to see the U.S. on a shortlist that these merging crypto platforms cannot service, alongside Syria, Sudan and North Korea, it is not just a disgrace, it is a disservice to the American people who should be able to access this technology.

He clarifies that he is unsure of Robinhood’s inside issues, but he understands the landscape behind Tenev’s comments about the regulatory situation “where there really isn’t much clarity”. However, he remains positive as he sees “the tide turning” for crypto.

Robinhood does not sound worried about the Q4 result and they are aiming to play the profitability slow and steady. Warnick said they are investing in crypto and looking forward to diversifying their product selection.

Total crypto market over $2.4 Trillion in the daily chart | Source: Crypto Total Market Cap from TradingView.com