Retail broker Robinhood has reportedly severed ties with market-making partner Jump Trading, calling time on a relationship that was instrumental in Robinhood’s move into the cryptocurrency trading arena. The genesis of this partnership dates back to 2018, when Robinhood, driven by a keen interest in the burgeoning digital asset market, sought help to navigate the labyrinth of the crypto economy. Despite the deep-seated skepticism of major trading houses towards this novel market, Jump Trading rose to the challenge, propelling Robinhood’s crypto ambition.
However, these seemingly robust links have now wilted, raising many eyebrows given the billions of dollars in trading volume that Robinhood generates through these market-making companies, Jump Trading being one of the largest. This unexpected turn of events has been attributed to the unsteady and nebulous regulatory landscape that is often characteristic of the crypto market in the US. Interestingly, Bloomberg suggests that Jump Trading aka Jump Crypto, the digital asset unit, has been gradually retracting from the US market due to increased scrutiny from regulatory watchdogs.
The volatile regulatory environment, however, is not the only factor driving this wedge. There seems to be an internal shift in alliances since last year. Financial filings with the US Securities and Exchange Commission (SEC) revealed no mention of Jump Trading’s affiliate, Tai Mo Shan Ltd, who managed Robinhood’s order flows in the last quarter of 2022. Instead, its competitors such as B2C2 surface in the reports, now handling Robinhood’s crypto flow.
Furthermore, Robinhood’s latest financial records indicate a declining interest in crypto trading, with trading figures plummeting 68% compared to the previous year. The monthly financial data reports crypto trading barely touching $2.1 billion in May 2023 compared to its whopping $6.6 billion the year prior. Furthermore, the crypto trading revenue too has shrunk, recording a modest $31 million in its Q2 2023 earnings report, marking an 18% fall from the previous quarter’s $38 million. However, on a rather promising note, Robinhood managed to achieve profitability for the first time since its inception.
Yet, despite these ominous signs, Robinhood continues to rank as one of the top holders of bitcoin (BTC), behind major crypto exchanges like Binance and Bitfinex, holding over $3 billion in a single wallet according to Arkham Intelligence data.
Evidently, the future of crypto trading seems to be threading on thin ice, grappling with regulatory uncertainties and shifting business alliances. Nonetheless, the crypto market continues to captivate interest, promising growth while testing its resilience against growing skepticism.