Robinhood’s Dogecoin Holdings Signal High Concentration Risk, Market Analyst Warns

Robinhood’s claim to fame in the crypto industry has been its meme coin offering for US trading, which specifically allows Dogecoin trading in the meme coin boom of 2021. Since then, the platform has grown to become one of the most prominent meme coin exchanges, and its Dogecoin balance has grown to the point where analysts are concerned about how much of the platform’s altcoin it currently holds.

Robinhood’s Dogecoin Holdings Rival Bitcoin

Recently, Beth Kindig, a researcher and analyst at IO Fund, revealed that Dogecoin Holdings’ focus on Robinhood was too high. In a post on X (formerly Twitter), Kindig pointed out that this high concentration has also seen trading volumes on the exchange go down along with decreasing volatility and volumes for Dogecoin in general.

In a blog post on the IO Fund website, the market analyst also explained that Dogecoin actually accounts for 62% of the total crypto transaction volume on the trading floor. Interestingly, crypto transactions make up 38% of Robinhood’s total revenue, which means Dogecoin makes up the majority of crypto transaction revenue.

At the same time, there was an increase in the volume of DOGE transactions on the exchange, especially compared to other crypto assets on the platform. For example, Dogecoin saw a 122% increase in customer ratings quarter over quarter. At the same time, Bitcoin, the largest cryptocurrency by market cap, saw a 68% increase in protected BTC assets.

What this shows is that Dogecoin trading has become a complex part of the platform business despite offering other trading assets. Although this has worked in times of great interest, the market analyst doubts if this is a good thing in the long term for the company.

Is Such High Concentration a Good Thing?

In a blog post, IO Fund questions Robinhood’s business viability, given its high reliance on Dogecoin trading. Pointing out that crypto trading rates have been sliding month after month, there is no doubting the strength of Robinhood’s revenue growth.

Furthermore, in addition to Dogecoin, there has also been uncertainty surrounding the platform when it comes to its listed tokens. Since the US Securities and Exchange Commission (SEC) has already sent a Wells Notice to trading, it remains to be seen which cryptocurrencies the regulator will see as securities and seek to stop trading.

However, if the volume of Dogecoin increases in the open market as consolidation remains high, then Robinhood can continue to see high transaction fees. “Doge’s recent increase was also associated with increased volumes and revenue for Robinhood in the first quarter, but led to lower trading volume and transaction revenue for Q2,” the blog read.

Featured image from CoinMarketCap, chart from Tradingview.com