Why Robinhood Stock Dropped 12% in January

Shares of trading platform stock Robinhood Markets (NASDAQ: HOOD) fell 12% in January, according to data provided by S&P Global Market Intelligence. The stock, which is highly exposed to cryptocurrency, has been moving in line with popular cryptocurrencies like Bitcoin. Bitcoin is down 25% over the past three months.

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Strong growth, high gains

Robinhood has become one of the foremost trading platforms for retail investors, and it now offers an expanded platform where people can also trade options and cryptocurrency. It has been reporting fantastic growth and high profits, and it continues to innovate, adding new high-value products. It's also entering new markets.

In the 2025 third quarter, revenue doubled year over year, while net income increased 271%. It added 2.8 million investment accounts, an 11% year-over-year increase, for a total of 27.9 million. Total platform assets rose to $333 billion, driven by increases across the platform, from net deposits to higher cryptocurrency valuations.

It's also attracting high conversions to gold member status. The gold membership has a low price of $50 annually and comes with many perks, including high rates on uninvested funds and matching retirement fund contributions.

The future looks bright, but as the sinking price makes clear, there's risk in the company's exposure to cryptocurrency. Revenue from cryptocurrency trading increased 300% year over year in the third quarter, driving total revenue growth and accounting for about a fifth of total company revenue.

On top of that, because its products are still predominantly trading-related, investors are concerned about how well the company will perform if the bull market takes a break soon.

Is Robinhood becoming mainstream?

Even though Robinhood's platform leans toward riskier products like cryptocurrency and its latest business, prediction markets, it's also edging closer to a mainstream financial platform. It's launching traditional bank accounts and has a credit card, and it has an incredible opportunity as it expands its platform in multiple directions.

However, considering where it's holding today, the market is concerned. On top of that, Robinhood stock had become expensive, with a P/E ratio north of 60. As Robinhood stock continues to fall along with Bitcoin, it's looking more attractive, with a P/E ratio of 36 as of this writing.

As the platform expands over time, Robinhood could turn into a major financial services powerhouse, but there's no small amount of risk here. Risk-tolerant investors might see this as an opportunity, but be aware that there could be more downside before the stock turns around, and there could be a lot of volatility along the way.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.