In a move that could change the cryptocurrency trading landscape, Robinhood (HOOD), the popular stock trading app, announced a $200 million strategic acquisition on Thursday with Bitstamp, one of the most globally established cryptocurrency exchanges.

While the deal will need to gain regulatory approval before becoming final, it signals Robinhood’s ambition to become a major player in the world of digital assets.

Robinhood’s big bet on global crypto trading

With a price tag of $200 million, the Bitstamp acquisition is Robinhood’s biggest deal to date.

Currently, Robinhood allows users to buy and sell a limited number of cryptocurrencies (such as Bitcoin, Ethereum and Dogecoin) within its app. While convenient for existing customers, the approach has made it difficult for Robinhood to compete within the broader cryptocurrency market.

The Bitstamp acquisition has the potential to change that. By integrating Bitstamp’s exchange functionality, Robinhood can offer its users a much wider range of cryptocurrencies to trade.

Founded in 2011, Bitstamp is one of the first and most established cryptocurrency exchanges. It has about 4 million retail and institutional investors, mostly in Europe, the U.K. and Asia. Bitstamp offers a secure platform for trading over 85 different types of cryptocurrencies, along with lending and staking options.

In essence, the deal has the potential to establish Robinhood with international users as a platform where traders can manage traditional stocks and options alongside their favorite digital coins.

Perhaps more importantly, Bitstamp comes with a strong reputation for regulatory compliance — it holds over 50 active licenses and registrations worldwide — a crucial factor for Robinhood as it seeks to expand its own crypto operations.

Robinhood’s stock and revenue performance

Robinhood’s stock price (HOOD) has been on a rip in 2024, more than doubling from its year-to-date lows in January. Shares traded at around $21 on June 6.

The company had a solid first-quarter earnings report, too, with total net revenue up 40 percent year-over-year to $618 million. Net income increased to $157 million year-over-year.

Transaction revenue from cryptocurrency alone was up a whopping 232 percent year-over-year, at $126 million, according to the report. In comparison, equities revenue at Robinhood was just $39 million during the same period.

Robinhood is diversifying in other ways, too. The company highlighted that customers transferred over $4 billion in retirement assets from brokerage competitors during Robinhood’s 3 percent transfer IRA promotion between January and April 2024, averaging over $90,000 per customer.

What investors should consider about Robinhood

The ink isn’t dry yet on the Robinhood-Bitstamp deal. Regulatory approval lies ahead, and a closing date isn’t expected until the first half of 2025.

Robinhood and Bitstamp customers can “expect the same level of service, security and reliability” as the two companies move forward with the deal, according to a June 6 release.

But what about for investors of the publicly traded company? Here are a few factors to consider about Robinhood in the months ahead.

  • Robinhood’s growth potential: A successful integration of Bitstamp and an expanded crypto offering could lead to a significant increase in Robinhood’s user base and generate new revenue streams. This type of growth could have a positive impact on the company’s stock price in the long run.
  • Regulatory landscape: The cryptocurrency market remains subject to ever-evolving regulations. Investors should be aware of potential hurdles that could impact or delay the deal, or hinder Robinhood’s crypto ambitions in the future.
  • Competition: The crypto exchange space is competitive. Robinhood will need to work hard to differentiate itself and attract users away from established players like Coinbase and Binance.

Bottom line

The planned acquisition of Bitstamp marks a significant step for Robinhood as the company seeks to carve out a larger share of the cryptocurrency market. The deal has the potential to propel Robinhood into a leading position, offering users a wider range of crypto assets.

However, success will hinge on Robinhood’s ability to navigate regulatory uncertainties, integrate Bitstamp effectively and stand out from the competition.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.