Analyst Warns of Robinhood’s ‘High Concentration Risk’ on Dogecoin ($DOGE) Crypto Trading Volume

Commission-free trading platform Robinhood has begun to come under scrutiny over its heavy reliance on meme-inspired cryptocurrencies, with one analyst suggesting the platform poses “high concentration risk in Dogecoin for the crypto trading volume and transaction revenue growth.”

The platform embraced the meme-inspired cryptocurrency during the 2021 cryptocurrency market boom and quickly became a major trading platform for it, with its volume increasing since then to the point that last year he moved about 8% of DOGE’s supply to a new wallet.

A recent analysis by IO Fund researcher Beth Kindig revealed the surprisingly high level of Dogecoin concentration on Robinhood. It shows that Dogecoin trades represent 62% of Robinhood’s total crypto trading volume, which translates to a significant portion of Robinhood’s crypto revenue coming from Dogecoin trading, given that crypto trades themselves account for 38% of revenue. total platform transactions.

While Robinhood offers a wider range of cryptocurrencies, Dogecoin trading has become the cornerstone of its crypto business. The platform saw a substantial increase in Dogecoin holdings compared to other assets, with customer balances increasing by 122% quarter-over-quarter.

This dwarfs the 68% increase in protected Bitcoin, the world’s top cryptocurrency by market capitalization, according to the blog article.

The post states that it is “likely that a majority of March’s $23.6 billion in crypto trading volume can be attributed to Dogecoin, and the same is true for April and May.” This, he adds, raises the question of “how sustainable the growth in transaction revenue is, assuming that crypto transaction volumes decline (30%) QoQ in the second quarter due to the decrease in volume of Dogecoin and a plateau in the third quarter.

Adding to the uncertainty is ongoing regulatory scrutiny surrounding cryptocurrencies, with the U.S. Securities and Exchange Commission (SEC) previously issuing a Wells Notice to Robinhood, a precursor to possible legal action. The result of this regulatory pressure, particularly regarding tokens that the SEC considers securities and trading bans, could further impact Robinhood’s crypto offerings.

Robinhood’s substantial Dogecoin holdings had long been a topic of interest in the crypto community, which was initially unaware that the meme-inspired cryptocurrency the largest portfolio belonged to the stock market.

Featured image via Unsplash.

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