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Robinhood Bets Big on Cryptocurrency with Bitstamp Deal – Forbes Advisor
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Robinhood has announced plans to acquire global cryptocurrency exchange Bitstamp. On June 6, the two sides said they had an agreement for Robinhood to acquire Bitstamp in a deal worth around $200 million.
The deal is expected to close in early 2025 and will expand Robinhood’s global reach and prominence in the crypto space.
Agreement details
Robinhood has a lot to gain from acquiring Bitstamp. Bitstamp holds more than 50 active licenses and registrations to operate as a cryptocurrency exchange in several countries and will significantly expand Robinhood’s crypto footprint.
As part of the strategic combination, Robinhood will have access to Bitstamp’s customer base, which spans the European Union, the United Kingdom, Asia and the United States. Bitstamp also has a strong institutional client base, something Robinhood has historically lacked.
“The deal accelerates Robinhood’s international expansion, giving it immediate access to international institutional crypto clients without having to go through the arduous licensing processes in Europe and Asia,” says Drayton D’Silva, CEO and chief investment officer of Tower Hills Capital . “It also provides Robinhood with revenue diversification.”
Robinhood expects the deal to be worth about $200 million in cash. However, this figure may vary slightly as it is still subject to customary purchase price adjustments.
Both parties expect the deal to close in the first half of 2025, subject to regulatory approvals and other customary closing conditions.
Robinhood used Barclays Capital exclusively as a financial advisor, and Galaxy Digital Partners acted exclusively as a financial advisor to Bitstamp.
Robinhood’s cryptocurrency business
Founded in 2013, Robinhood is arguably the best-known investing app. The trading platform has become popular due to commission-free trading and easy-to-use interface.
However, it has also faced criticism over the years for “gamifying” investing and for its pay-for-order-flow practice.
Robinhood’s first foray into cryptocurrency came in 2018, when the platform launched commission-free trading of bitcoin and Ethereum. Since, Robinhood has expanded its cryptocurrency offerings, adding many more cryptocurrencies to its trading platform. He debuted in crypto wallet in 2022.
More recently, cryptocurrencies have played a significant role in Robinhood’s profitability and success. In the first quarter of 2024, the company attributed much of its record revenue to a 232% increase in revenue from cryptocurrency transactions.
As the company aims to further expand its cryptocurrency offerings, it makes sense that it would look to acquire an established cryptocurrency exchange.
Bitstamp, founded in 2011, is among the oldest cryptocurrency exchanges. It is known for its user-friendly platform and reasonable trading fees which make it an attractive choice for beginner cryptocurrency investors.
The state of the cryptocurrency industry
After acquiring Bitstamp, Robinhood will likely gain market share major competitors such as Coinbase. This comes at a time when the cryptocurrency winter appears to be thawing. It appears that many regulators and politicians are easing their resistance to cryptocurrencies.
Earlier this year, the Securities and Exchange Commission, or SEC, approved 11 of them spot bitcoin exchange traded fundsor ETFs. More recently it took the first step towards approval Spot ETF on Ethereum Also. This marked a significant U-turn against cryptocurrencies by the SEC.
Now, Robinhood’s acquisition of Bitstamp is the latest news that indicates the cryptocurrency industry is moving towards greater mainstream acceptance.
“For the broader cryptocurrency market, this deal could have several impacts. First, it could increase adoption and trust in cryptocurrencies, as more people see a brand known as Robinhood delve into the world of cryptocurrencies. This could boost confidence among investors who were hesitant to dive in,” says Michael Baynes, co-founder and CEO of Clarify Capital.
“Second, it could push other financial platforms to improve their crypto services, leading to more innovation and competition. This, in turn, could lead to better services and more options for users.”
Investors should keep their eyes peeled as this deal progresses. Time will show the extent to which this deal makes Robinhood a major player in the cryptocurrency industry and what it means for the cryptocurrency industry in general.
According to Baynes, “The overall success of this acquisition will depend on how well Robinhood integrates the new platform and meets the needs of cryptocurrency investors.”
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