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00:00 Speaker A
Christian, would you would you argue that Robin Hood, are they in any way better positioned during this Bitcoin drawdown than prior drawdowns because they’ve diversified the product lineup or or the regulatory backdrop. I’m curious to get your thoughts there.
00:20 Speaker B
Yeah, it’s definitely a different winter. Uh I would say we are surprised about how severe crypto prices have come given we should have a more constructive backdrop for crypto. And um so it’s been somewhat surprising, but from a business, from Robin Hood’s business perspective, they are, they’re definitely better set up. This is a much more mature company, a much more diversified company. Um, you know, not just in terms of its the types of transaction businesses it has, but also just the types of businesses it has. It has um a net interest income is a much bigger part of the revenue stream. They have things like retirement, launching a banking product with credit cards. So this is much more of a money app um that is in many, many businesses and way more diversified than in prior periods. And just from a business perspective, better managed, more discipline on on expenses, very profitable company. So all these things set up the company very well for I’d say a crypto winter.
01:39 Speaker A
What about options trading, Christian? Because as as you know, listen, biggest biggest business for the company. I think it’s something like uh 25% Christian of revenue. Uh what are the catalysts you see ahead for that business?
01:56 Speaker B
Uh we like the business a lot. Yeah. So options, um for the most part have been options penetration, I.E, just how many options have been used relative to the underlying equity markets has been growing for the last 30 years and has only accelerated in recent, in recent times, partly because of firms like Robin Hood that have made it easier to use and understand and increased accessibility. Also products like zero dated options that give you much more precision around um risk management have also driven um significant adoption of options. So, we’ll do some analysis on this and we think, um, you could see something like 40% incremental growth in the options business because of increment because of all the penetration we’ve seen, the new products and the normalization of what we call options penetration. So, you know, pretty constructive on options and I said, that’s the biggest business. It’s less cyclical, believe it or not because people can treat options in up and down markets. It can be used to generate yield. It’s a very flexible product. Um and and Robin Hood offers basically the best value. They charge the least relative to uh the um the bigger players out there. So there’s a value prop from using the platform, it’s a great UI, and the underlying market is growing very fast. So I think a really good business for Robin Hood long-term.
03:22 Speaker A
You mentioned Christian, the the company’s movement to prediction markets. Uh how confident are you about the growth story there long-term, Christian? Especially, you know, listen, they they certainly have plenty of competition, right?
03:41 Speaker B
Yeah, it’s a it’s a it’s a good point. So, um, there’s a lot of competition. Um the good thing about Robin Hood is their value prop from a business perspective is the distribution. There’s not many folks that can distribute or have the distribution that they do. So there could be a lot of competition around the products, Kalshi, Polymarket, the exchanges, everybody can launch their own product, but they all still need the pipes to distribute that through. and that’s where Robin Hood really stands out. It’s not just that they have the numbers, they have the type of customers that really um that where where prediction markets really appeal to. and you see it’s in the numbers. So, um, despite the increasing competition, I actually see Robin Hood coming out um as a winner here and if anything, they could actually monetize better over time as they build their own uh platform, right? They just announced a partnership with Susquahana that gives them much more control of their economics, gives them much more ability to um be faster around product innovation. And like prediction markets are tiny relative to um, you know, broader futures markets, broader, um options market. So the pathway for growth here is pretty significant.