An Alternative Play on Cryptos (and Options)
Well, here we go again…
Bitcoin is on the move today.
The world’s largest cryptocurrency is back above $100,000. And the catalyst is what it’s been since November 6… Donald Trump. Though this time, there’s a growing belief that the incoming 47th president will make crypto a national priority starting Day 1.
Now, not everybody’s a fan of crypto.
Some outright despise it and decry it as a scam.
The problem is, crypto has been the best performing asset over the past decade and a half. And not by a handful of percentage points or even a country mile. I mean, Bitcoin has returned more than 10-times what Nvidia (NVDA) has.
That’s why I believe every investor’s portfolio should contain some exposure to crypto. It’s why I’ve spent nearly the past decade recommending it. And today, I’m going to share another of my favorite crypto plays for 2025.
Best of all, it’s a less volatile way to gain some exposure to Bitcoin… as well as options.
From Sherwood Forest to Wall Street
Robinhood Markets (Nasdaq: HOOD) is at the leading edge of democratizing access to financial markets.
The investing platform allows users access to a wide variety of stocks, ETFs, ADRs, options, gold, and even cryptocurrencies.
But it also offers attractive incentives for younger and less affluent investors, as well as hardcore traders. These include the ability to buy fractional shares, to set up recurring investments and retirement accounts, as well as round-the-clock trading.
Of course, Robinhood’s biggest claim to fame is commission-free trading on stocks, options, ETFs, and cryptocurrencies. And it’s account minimum is $0.
When Robinhood launched in 2013, this was unheard of.
And many of the established firms on Wall Street looked down on the upstart. That’s because it was believed the platform would only attract young, inexperienced investors with very little to no money.
But the joke was on them.
By 2019, Charles Schwab (SCHW) was forced to implement commission-free trading to fend off the growth of Robinhood. And today, commission-free trading on stocks is now the standard in the U.S.
At the same time, Robinhood has earned its position among America’s pantheon of brokers.
An Ideal Spot for 2025
In its November monthly report, Robinhood announced it had 24.8 million customers. That’s an increase of 313% from the 6 million it had in 2018.
And Robinhood reported it had $195 billion in assets under custody (AUC). This was a 106% increase from November 2023. Meanwhile, net deposits increased 50% to $47.4 billion.
But the biggest driver of growth for Robinhood over the past year has been… you guessed… cryptocurrencies.
In fact, Crypto Notional Trading volumes in November increased 500% from October to $35.2 billion. And this was a more than a 700% increase over November 2023.
Even though Robinhood doesn’t charge commissions on trades, it does make money through a system known as payment for order flow. The company sends its customers trades through a market maker – who actually makes the transaction. And Robinhood receives compensation at a rate of fractions of a penny per share.
The great aspect about this is, it doesn’t matter if markets are up or down, or if cryptos are up or down. As long as there’s volatility, which triggers trades and transactions increase, Robinhood sees this compensation grow.
In the third quarter, the company reported the second-highest revenue on record of $637 million. This was a 36% increase over the third quarter of 2023. During the quarter, transaction-based revenue rose 72% to $319 million, with options revenue accounting for $202 million of that.
Options are becoming increasingly popular. And 0DTE options account for more than 40% of all options trading.
Meanwhile, Robinhood’s third quarter cryptocurrency revenue surged 165% to $61 million.
Keep in mind these third quarter figures reported on October 30.
That was before the U.S. presidential election was decided and the surge we’ve seen in markets and cryptos since.
Today, shares of Robinhood set new 52-week highs.
But looking ahead, I believe there’s plenty to be excited about.
For 2025, analysts expect Robinhood to report $3.21 billion in revenue with earnings of $1.40 per share – up double digits over 2024.
And recently, Bernstein analyst Gautam Chhungani named the company as the Top Idea for 2025, highlighting its strong presence in the crypto space.
Chhungani wrote, "Robinhood is our new Best Idea in our Global Digital Assets coverage. It has so far operated a constrained crypto business, but we expect this to change as the regulatory environment for crypto becomes more favorable."
Now, even though equities and cryptos started 2025 with a cool down, we have two cycles that should act as tailwinds for Robinhood this year.
The first is the second year of the two-year bull market we see in Bitcoin following the reward halving. This rising tide lifts the entire crypto ecosystem. (Not to mention, we have the new administration making crypto a priority.)
And the other is the historically, the first year of a new presidential term is exceptionally strong for stocks.
To me, Robinhood is at the crossroads of both of these profitable trends. And I believe today’s new highs are merely the start.
Betting Bitcoin - and Robinhood - head higher,
Matthew
P.S.
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P.S.S.
Be sure to check out my friend Jonathan Rodriguez’s The Music of the Markets substack. If you like music and market analysis, it’s a great read. Plus, Jonathan and I should have a cool project to share next week!