Robinhood accumulated B in Bitcoin in 3 months — What does this mean for markets?
Robinhood accumulated B in Bitcoin in 3 months — What does this mean for markets?

In a swift and interesting turn of events, a previously mysterious Bitcoin (BTC) address has managed to ascend to the respected position of being the third largest Bitcoin holder. As Cointelegraph reported on Aug. 22, the address has amassed a staggering 118,000 BTC.

Although its identity has now been identified as Robinhood, questions remain as the financial giant has neither confirmed nor denied the allegations. Some on-chain analysts believe that the collection actually belongs to MicroStrategy, an American business intelligence and analytics software company, which holds 152,800 bitcoins according to their recent filing with the SEC.

Will TradFi replace crypto-focused intermediaries?

If Robinhood’s ownership of the 118,000 BTC is verified, the fallout could reverberate throughout the cryptocurrency space. Traditionally, the largest Bitcoin addresses have been primarily associated with cryptocurrency exchanges. However, Robinhood’s role as a traditional stock- and options-focused broker sets an interesting precedent.

Robinhood’s latest 10-Q at a glance archive revealed that they hold $4.24 billion worth of Bitcoin. Given that Bitcoin’s price was close to $30,500 on June 30, this equates to approximately 139,016 BTC – a fact that fits seamlessly with on-chain analysts’ view that Robinhood holds significant amounts of the cryptocurrency.

If Robinhood is the owner of the “mysterious” Bitcoin address, then that would be clear. Bitcoin’s success does not depend on large institutions. Analysts used to think that for bitcoin to really take off, it would need more big investment firms or the likes of Tesla and Block & Co. to get on board. But those hopes were finally dashed as recent reports from Apple and Alphabet (Google’s parent company) suggested that they hadn’t taken the plunge at all.

Regarding Robinhood, reports say they have about 23.2 million active users as of June 2023. If only 10% of them own some bitcoin, they would need an average of about $1,828 each to reach their reported $4.24 billion bitcoin holdings. This shows that ordinary people, like those on Robinhood, can actually play a significant role in shaping the cryptocurrency landscape.

Cons of Robinhood Holding Bitcoin

While some investors hope for mass adoption of Bitcoin by any means possible, achieving this goal is not without risks. Robinhood’s user base is known for its avid speculative trading, especially in meme stocks like AMC, GameStop, and Bed Bath & Beyond. These traders also own large amounts of Dogecoin (DOGE) — worth as much as $2.63 billion.

Their short-term investment tendencies have raised questions about their attitude towards Bitcoin. If these investors buy BTC in anticipation of the approval of a U.S. spot ETF, the prospect of a prolonged price drop or delayed approval could trigger a massive sell-off.

In addition, a more distant but conceivable risk arises from the possibility of US government intervention. While the likelihood of something similar to Executive Order 6102 of 1933 (mandating the conversion of privately held gold into paper money) appears remote, potential actions by US authorities could jeopardize these holdings.

Even in the event that the U.S. justice system or the IRS choose to lock up these assets while investigating users’ taxes or similar issues, Robinhood’s large Bitcoin holdings only magnify the potential risk. The large pool of assets held by Robinhood increases the risk that such actions will affect a larger portion of the market.

Related: ARK, Glassnode Propose Framework for Economic Analysis of Bitcoin Using New Metrics

Paradoxically, the large number of cryptocurrencies held by Robinhood customers could become ammunition for ETF applicants. While offering a similar service, Robinhood may lack investor protections, which could spur the creation of safer, more regulated ETFs.

Robinhood’s new status in the cryptocurrency space underscores the ever-evolving nature of the market. Whether or not a spot bitcoin ETF materializes, investors will find other ways to increase exposure to the cryptocurrency, whether through MicroStrategy stock, Robinhood, or other innovations. This adaptability aptly suggests that innovation and progress are inevitable in finance—just as nature relentlessly seeks a way out.