- The U.S. Federal Reserve’s rate increases are expected to result in higher interest income for Coinbase Global Inc. and Robinhood Markets Inc.
- Central banks throughout the world have been desperately working to stabilize the economy to curb inflation.
- Coinbase will see a 28% increase in subscription revenue, while Robinhood will see a 65% increase in net interest revenue.
According to analysts, a frequently disregarded financial metric could protect American online trading companies from declining demand in the third quarter.
The U.S. Federal Reserve’s rate hikes are anticipated to increase interest income for bitcoin exchange Coinbase Global Inc. and commission-free brokerage Robinhood Markets Inc.
However, the companies are also anticipated to announce a fall in overall third-quarter revenue due to inflation as consumer traders sought refuge in cash rather than speculating on risky assets.
Reports of institutional investors shunning the crypto market are likely to have a negative impact on Coinbase and Robinhood’s interest income, according to Wedbush Securities Inc.
Robinhood and Coinbase have been able to weather the market turmoil due to their focus on commission-free trading, said Sam Doctor, an analyst at CFRA Research.
The world’s central banks have been frantically trying to calm the economy in order to control inflation, which despite several rate hikes this year, is still rampaging at levels not seen in four decades.
This has caused a startling turnabout in the fortunes of lenders who were previously under pressure from near-zero interest rates.
According to analysts, the “margin investing” option, which allows users to borrow money at significantly lower rates than the going rate, can also be used to increase subscriptions to the premium Robinhood Gold service.
In contrast, Coinbase makes money off the reserves that support USD Coin (USDC), the second-largest stablecoin by market value that it has created in partnership with Circle.
According to IBES statistics from Refinitiv, analysts anticipate a 65% increase in net interest revenue at Robinhood, while a 28% increase in subscription and service revenue, which includes interest income, at Coinbase.
After the bell on Wednesday, Robinhood is scheduled to release its third-quarter earnings, and Coinbase is scheduled to do the same on Thursday.
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