Robinhood’s Bitstamp Deal is Strategic and Brings Added Institutional Exposure: Bernstein

As an experienced financial analyst, I believe that Robinhood’s (HOOD) acquisition of Bitstamp is a shrewd move to expand its crypto business and establish a stronger presence in the competitive cryptocurrency market. With this deal, Robinhood can offer markets in many more tokens than it currently does, positioning itself well against competitors like Coinbase and Kraken.

In a recent research report published on Friday, investment firm Bernstein noted that Robinhood’s (HOOD) acquisition of Bitstamp represents a strategic expansion for the trading platform in the crypto market. This move positions Robinhood competitively against industry peers such as Coinbase (COIN) and Kraken.

The broker points out that Bitstamp, being among the earliest crypto exchanges, has proven resilient throughout various market fluctuations, with Robinhood similarly enduring.

Robinhood allows U.S. retail investors to trade in 15 cryptocurrencies, while European users have access to over 30 tokens. In contrast, Bitstamp provides trading options for over 85 different tokens. By purchasing an exchange, Robinhood can expand its offerings and provide markets for a larger selection of tokens.

Analysts Gautam Chhugani and Mahika Sapra explained that by undergoing a complete exchange, HOOD will gain access to extensive global liquidity. Consequently, this access enables HOOD to provide liquidity to its broker platform, which could potentially enhance its economics.

Robinhood’s note mentioned that the company provides various services like staking, stablecoins, trading, custody, and prime broking. The acquisition of Bitstamp could expand Robinhood’s crypto offerings to a more institutional customer base. Bernstein maintains an outperform rating for Robinhood stock, with a predicted price of $30. The shares remained relatively unchanged during early trading on Friday, hovering around $23.

In a report released on Thursday, JMP Broker stated that Robinhood’s acquisition of Bitstamp will expand their role in the rapidly developing cryptocurrency marketplace. By acquiring an exchange, Robinhood will be able to forge deeper connections within the crypto industry and potentially explore new opportunities related to tokenizing assets and securities.

The deal will expand Robinhood’s reach to institutional investors and hasten its expansion in Europe, according to the report.

According to JMP, Bitstamp’s profits are minimal at most, so they don’t anticipate significant financial gains from the transaction. JMP maintains an optimistic outlook on the company, assigning it an “outperform” rating and setting a $30 target price for its stock.