Robinhood Is Now Making More Money From Prediction Markets Than Crypto Trading. Here's What That Means For Crypto Investors

Having pioneered commission-free trading, Robinhood (NASDAQ:HOOD) is viewed as one of the most innovative online brokerages available for retail investors.

The company proved this yet again in the second quarter, showing just how much its early foray into the prediction markets is paying off.

Robinhood saw its transaction revenue from event-based contracts soar to $156 million in the second quarter, up over $50 million from the prior quarter and from practically nothing just one year ago.

This is also the first quarter in which event-based contracts revenue exceeded crypto transaction revenue, which came in at $100 million in the second quarter, down $60 million from one year ago.

Here’s what this means for crypto investors.

Image source: Getty Images.

The crypto bear market

The weak quarter in crypto for Robinhood should come as no surprise, given the ongoing crypto winter. The price of Bitcoin is down nearly 26% this year.

The less interest there is in crypto, the fewer trades will be made, which hits every crypto platform. Robinhood’s $100 million of crypto-related transaction revenue is the weakest crypto quarter the company has seen in the past seven quarters. The number also missed Wall Street consensus estimates by $25 million.

When asked during a CNBC interview about concerns in the crypto business, Robinhood CEO Vlad Tenev said, “Long term, I think crypto is in a growth cycle.”

The company has been launching more products centered around digital assets.

Robinhood recently launched a layer-2 solution on Ethereum called Robinhood Chain that allows its tens of millions of users to trade tokenized U.S. stocks 24/7 in over 120 countries.

Tenev said the chain is the fastest ever to reach 100 million in transactions.

Robinhood Earn, the company’s stablecoin, has also seen $200 million in customer deposit inflows, which can earn a massive 7% annual percentage yield.

This shows that while crypto values may not be faring well, the underlying blockchain technology remains quite useful.

An uncertain future

If you are a crypto investor, these developments at Robinhood indicate strong demand for blockchain-based solutions.

Now, this crypto winter certainly feels different from past ones because it seems, to a certain extent, that investors have lost interest in crypto assets.

However, history is on the bulls’ side: cryptocurrencies have made remarkable recoveries after severe drawdowns, so investors can never count the sector out.

The passage of the Clarity Act, which is currently pending in the U.S. Senate, could serve as a catalyst.

Tenev also said he’s paying close attention to what happens with the U.S. Strategic Bitcoin Reserve, which President Donald Trump created via executive order last year but has not yet been officially launched.

It’s possible that crypto investors simply got ahead of themselves last year when Trump came in with a pro-crypto agenda, the first President to really embrace crypto.

It’s also possible that exuberance over artificial intelligence and quantum technology has overshadowed crypto. What happens next is anyone’s guess, as crypto movements are extraordinarily difficult to predict.

My advice for crypto bulls is to stick with mainstream tokens like Bitcoin and Ethereum, which could certainly still have promise. Bitcoin may yet serve as a key store of value, while Ethereum’s blockchain network remains compelling. I would ignore most other cryptocurrencies right now.

Bram Berkowitz has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.