Markets
Robinhood’s (HOOD) Bitstamp Deal Is Strategic and Brings Further Institutional Visibility: Bernstein
Robinhood (HOOD) acquisition of Bitstamp It’s a strategic move by the trading platform to expand its cryptocurrency business and positions the company well against competitors like Coinbase (COIN) and Kraken, broker Bernstein said in a research report on Friday.
The broker points out that Bitstamp, as one of the oldest exchanges offering cryptocurrencies, Robinhood has “withstood the test of time over multiple cycles.”
Robinhood offers 15 cryptocurrencies to retail investors in the US and more than 30 tokens in Europe, while Bitstamp lists more than 85 tokens, the report said. By acquiring an exchange, the trading platform can offer markets in many more tokens.
“With a full exchange, HOOD gains access to global liquidity and can therefore offer liquidity to its broker platform, potentially improving its economics,” analysts Gautam Chhugani and Mahika Sapra wrote.
The exchanges offer a wide range of services such as staking, stablecoins, trading, custody and prime brokering, the note said. The Bitstamp acquisition potentially allows Robinhood to offer a broader range of crypto products to a more institutional customer base. Bernstein has an outperform rating on Robinhood shares with a $30 price target. Shares were little changed in early trading Friday at around $23.
Broker JMP said the Bitstamp acquisition will “promote opportunities to broaden Robinhood’s participation in the evolving cryptocurrency value chain,” in a report on Thursday. Owning an exchange will give Robinhood the opportunity to connect more deeply to the crypto ecosystem and could allow the platform to become more involved in the tokenization of assets and securities, the report said.
The acquisition will give Robinhood greater visibility among institutional clients and accelerate the company’s growth in Europe, the report adds.
Since Bitstamp is marginally profitable at best, JMP said it does not expect material upside from the deal. JMP has an Outperform rating on the stock with a $30 price target.