Robinhood vs. Coinbase Rivalry Heats up After $200M Bitstamp Deal

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US-based trading platform Robinhood (HOOD) acquired crypto exchange Bitstamp in June 2024 in a deal worth about $200 million to expand its crypto offering overseas and to compete with full-fledged crypto service providers like Coinbase (COIN).

The deal will see Robinhood expand its crypto services beyond token trading by integrating Bitstamp’s institutional business, lending, and staking services.

In this article, we analyze how the Bitstamp acquisition deal will shape the rivalry between Robinhood and Coinbase – the two most popular crypto trading platforms in the US.

Key Takeaways

  • Robinhood’s crypto business contributed less than 20% to its total annual transaction-based revenue in 2023.
  • Bitstamp deal will introduce a new revenue stream for Robinhood from institutional crypto clients.
  • Coinbase’s transaction revenue from institutional business nearly tripled year-on-year in Q1 2024.
  • Bitstamp was the fourth-largest CEX in Europe in 2023.
  • Bitstamp’s compliant-first approach and strong reputation will help institutional clients feel at home with Robinhood.
  • Kaiko report said the EU is well positioned to capitalize on a new bull market within a safer environment following the implementation of MiCA in 2024.

Why Is Robinhood Buying Bitstamp?

Bitstamp is one of the oldest crypto exchanges in the world. As of June 2024, the crypto exchange had over 50 active licenses and registrations globally. The company’s core market was Europe where it offers over 110 different cryptocurrencies to customers.

Meanwhile, Robinhood’s crypto business focuses on offering spot trading in the US. The company doesn’t offer a wide variety of crypto. At the time of writing, only 15 tokens were available for trading on its platform.

In the full year of 2023, Robinhood’s crypto business contributed less than 20% to its total annual transaction-based revenue. The company is now aiming to accelerate the growth of its crypto business by acquiring a well-established and compliant crypto exchange, Bitstamp.

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The Bitstamp acquisition will introduce a new revenue stream for Robinhood from institutional crypto clients. Bitstamp’s institutional crypto services provides trade execution, deep order books, OTC trading and API connectivity to brokerage firms, market aggregators, proprietary traders, family offices, hedge funds and banks across Europe and Asia.

“Acquiring a global exchange will significantly accelerate Robinhood Crypto’s expansion worldwide,” said Robinhood in a press release.

“With Bitstamp’s other institutional offerings like white label solution Bitstamp-as-a-service, institutional lending, and staking, Robinhood will enter the space with active and established relationships, infrastructure and industry-leading products,” added Robinhood.

Robinhood vs. Coinbase: International Expansion & Institutional Business

The Bitstamp acquisition will eventually make Robinhood a fully-fledged crypto service provider like Coinbase. Retail investors in the US will now have two companies to choose from as they bet on the growth of the crypto market.

Let’s analyze the key areas that Robinhood is looking to expand into via the Bitstamp acquisition while keeping in mind its growing rivalry with Coinbase.

1. International Expansion

Robinhood crypto trading platform has a near-zero market share outside of the US. Barring a few jurisdictions in the European Union (EU), Robinhood’s crypto customers are all based in the US.

Even after the Bitstamp acquisition, Robinhood has work cut out to catch up to Coinbase. According to a Q1 2024 report by CoinGecko, Coinbase was the fourth-largest spot centralized exchange (CEX)  in the world by trade volume. Bitstamp and Robinhood, on the other hand, did not make the top 10 list.

Bitstamp’s by-the-book approach towards market regulations is often cited as the main reason behind the exchange’s lagged global growth.

However, if we only consider only the European region, Bitstamp pips Coinbase in the rankings. According to a 2023 report by the crypto data firm Kaiko, Bitstamp was the fourth largest CEX in the region, with a 7.6% market share in Europe. Coinbase came in fifth with a market share of 6.2%.

Cumulative EUR Trade Volume in 2023.
Cumulative EUR Trade Volume in 2023. Source: Kaiko

Robinhood’s acquisition of Europe-focused Bitstamp has come at a great time for cryptocurrencies in Europe. The EU passed the landmark Markets in Crypto Asset Regulation (MiCA) framework in 2023 that aimed to clearly define and regulate cryptocurrencies.

On the contrary, the crypto industry in the US is still grappling with regulatory uncertainties and an unfriendly regime marked by the prosecution of several crypto companies, including Coinbase, Binance, Uniswap, and Kraken.

“While Europe has historically lagged the U.S. and APAC in crypto trading activity and investment, this trend is primed for reversal in 2024. A growing number of exchanges are opening headquarters in the region thanks to a clear regulatory regime, financial institutions are continuing to invest in digital asset initiatives, and trading activity is on the rise, suggesting a recovery in consumer sentiment,” said Kaiko. “With MiCA set to take effect in 2024, the EU is well positioned to capitalize on a new bull market within a safer environment.”

2. Institutional Business

The most significant theme of the crypto industry in 2024 has been the institutionalization of crypto. The approval of spot Bitcoin (BTC) and spot Ether (ETH) ETFs in the US has paved the way for investment banks, hedge funds, pension funds, and family offices to invest in cryptocurrencies in a compliant manner.

No wonder Coinbase’s institutional business is booming, as shown in its Q1 2024 earnings report.

Trading volume from institutional clients at Coinbase more than doubled (+106%) to $256 billion in March 2024 from a year ago. Interestingly, institutional trading volume was over four times more than retail trading volume ($56 billion) during the quarter, Coinbase reported.

Transaction revenue from institutional business nearly tripled year-on-year (+283%), and custodial fee revenue posted a 90% year-on-year growth during Q1 2024, Coinbase said.

Now, Robinhood is eyeing a slice of the pie.

Choosing Bitstamp as its acquisition target looks like a shrewd move, given its established institutional business. More importantly, Bitstamp’s compliant-first approach and strong reputation will help skittish institutional clients feel at home with Robinhood.

Robinhood is particularly well-positioned to grow its institutional business in Asia. Singapore – an aspiring crypto hub and established financial center – has been a region of focus for Bitstamp’s institutional business.

In March 2024, Bitstamp received an in-principle approval to obtain a major payment institution license in the Southeast Asian city-state.

“Our primary focus within Singapore will be on serving institutions including intermediaries such as payment processors, fintech companies and brokerages,” said Bitstamp. “We’re confident about our proposition for institutional and retail customers we serve in the Asia-Pacific region, with Singapore at the core of our strategy.”

The Bottom Line

Many investors make the mistake of looking at Coinbase as “just an exchange.” The company is one of the most innovative crypto companies in the world having launched an Ethereum L2 chain called Base in 2023 and providing key crypto user experience improvements via smart wallets in 2024.

Meanwhile, Robinhood’s focus on providing a user-friendly interface is exactly what the crypto industry needs to further global adoption.

Both companies will be crucial to the future of crypto.

FAQs

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Mensholong Lepcha
Crypto & Blockchain Writer
Mensholong Lepcha
Crypto & Blockchain Writer

Mensholong is an experienced crypto and blockchain journalist, now a full-time writer at Techopedia. He has previously contributed news coverage and in-depth market analysis to Capital.com, StockTwits, XBO, and other publications. He started his writing career at Reuters in 2017, covering global equity markets. In his free time, Mensholong loves watching football, finding new music, and buying BTC and ETH for his crypto portfolio.