Why Robinhood Stock Soared This Week

stock robinhood market (Hood 1.86%) The company flew higher this week thanks to the latest cryptocurrency boom. bitcoin (BTC -1.00%) This week, hopes for a new Bitcoin ETF topped $44,000 per token, hitting its highest level in more than a year. The rest of the cryptocurrency sector rose significantly on these tailwinds, ignoring the following news: BinanceThe world’s largest cryptocurrency exchange was fined more than $4 billion for failing to prevent money laundering on its platform, with founder Changpeng Zhao stepping down as CEO after pleading guilty to a felony.

Throughout its history, Robinhood’s success has been closely tied to cryptocurrency, and that relationship has shown itself again. As of Thursday’s close, Robinhood shares were up 23.2% for the week, according to data from S&P Global Market Intelligence.

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Robinhood prepares for a comeback.

Bitcoin’s resurgence is gaining renewed interest among cryptocurrency investors, according to data from Robinhood.

The company said in an after-hours filing Monday that Robinhood investors invested $1.4 billion in net deposits in November, with cryptocurrency trading volume up 75% from October levels.

The news sent Robinhood shares up more than 10% on Tuesday, and the stock continued to rise from there, adding another 7% on much higher volume on Wednesday.

The stock rose 1.5% on Thursday after the cryptocurrency began trading in the EU. This was a timely move considering the recent rise in cryptocurrency prices. Robinhood offers buying and selling support for over 25 cryptocurrencies and says it has, on average, the cheapest cryptocurrency trading platform in the EU.

Will the rebound continue?

Bitcoin is up slightly from its highs earlier this week, but the major cryptocurrency could easily fall back down, especially if news breaks about a potential ETF.

Robinhood’s business is highly correlated with interest in the stock market and cryptocurrency trading, and the continued boom in cryptocurrencies will likely attract more investors to Robinhood.

For example, Robinhood had 11.7 million monthly active users in 2020. This surged to 17.3 million in 2021 due to the surge in cryptocurrencies and growth stocks, but fell to 11.4 million in 2022 as stock and cryptocurrency share prices plummeted. Assets under management followed a similar trajectory.

There’s another reason investors are excited about Robinhood. The company finally achieved its first Generally Accepted Accounting Principles (GAAP) profit in the second quarter, driven by increased interest income and cost-cutting efforts.

Although the company swung to a loss in the third quarter, its second-quarter profit shows that the company’s bottom line could surge if cryptocurrency interest continues to rise because there is a lot of leverage in the company’s business model.