Markets
Robinhood’s (HOOD) Bitstamp deal is strategic and brings additional institutional exposure: Bernstein
Robinhood (HOOD) buyout of Bitstamp This is a strategic move by the trading platform to grow its crypto business and position the company well against competitors such as Coinbase (COIN) and Kraken, broker Bernstein said in a report on Friday of research.
The broker notes that Bitstamp, as one of the oldest exchanges offering cryptocurrencies, Robinhood has “withstood the test of time over multiple cycles.”
Robinhood offers 15 cryptocurrencies to retail investors in the United States and more than 30 tokens in Europe, while Bitstamp lists more than 85 tokens, the report said. By acquiring an exchange, the trading platform can offer the markets many more tokens.
“With a full exchange, HOOD has access to global liquidity and can thus offer liquidity to its own brokerage platform, potentially improving its economic situation,” wrote analysts Gautam Chhugani and Mahika Sapra.
The exchanges offer a wide range of services such as staking, stablecoins, trading, custody and prime brokerage, the note said. The acquisition of Bitstamp potentially allows Robinhood to offer a wider range of crypto products to a more institutional clientele. Bernstein has an Outperform rating on Robinhood stock with a $30 price target. Shares were little changed in early trading Friday, at around $23.
Brokerage JMP said the acquisition of Bitstamp “will create opportunities to expand Robinhood’s participation in the evolving crypto value chain,” in a report released Thursday. Owning an exchange will give Robinhood the ability to connect more deeply with the crypto ecosystem and could allow the platform to become more involved in the tokenization of assets and securities, the report said.
The acquisition will give Robinhood more visibility among institutional clients and accelerate the company’s development in Europe, the report added.
As Bitstamp is marginally profitable at best, JMP said it does not expect a significant increase in trading. JMP has an Outperform rating on the stock with a $30 price target.