Retail investor surge here to stay with trading app valuations and interest on the rise
Are retail trading apps like Robinhood and Coinbase a stepping stone to the next generation of trading?
By Vanessa Malone
The attention surrounding the GameStop stock frenzy has pushed retail investing interest to an all-time-high.
Over the past few weeks, investing and finance apps like Robinhood, Webull, TD Ameritrade, and others have reached record-breaking daily users and chart rankings in Apple and the Google Play Store.
The fact that these retail trading apps were able to overtake social media apps in popularity, even for a brief period, is a great indicator that retail investing is becoming more mainstream.
Another great indicator — the multi-billion-dollar valuations given to companies behind the regulated retail trading apps.
Case #1 Robinhood valued at $40 billion
Robinhood made waves with its zero-commission trades, offering investors a window into the stock market with an intuitive interface. According to Rainmaker Securities, the latest private bids for Robinhood shares puts the company’s valuation around $40 billion.
Obstacles: The idea that “if something is free, you’re the product” got brought to light when Robinhood limited trading for GameStop “GME” and other volatile stocks for retail investors while hedge funds were able to freely buy and sell the same stocks at leisure. Robinhood partakes in “payment for order flow,” the controversial practice of collecting fees from selling user trading data to electronic market makers. This begs the question as to who the real Robinhood customer is.
Case #2 Coinbase valued at $77 billion
If Robinhood is a window into the stock market, then Coinbase is its counterpart offering an onramp into the crypto market. Coinbase has also seen a rise in popularity following the DeFi surge and price rallies for Bitcoin, Ether, and other cryptocurrencies. Coinbase, which is gearing up for a direct listing, is being valued at $77 billion based on trading for the company’s privately held shares.
Obstacles: Coinbase is open about their fees and does not sell order flow, but the app is centralized, meaning traders entrust Coinbase to hold their assets and conduct transactions on their behalf. Centralized exchanges often create honeypots for hackers attempting to access the pooled data and assets.
Are retail trading apps like Robinhood and Coinbase a stepping stone to the next generation of trading?
Robinhood had more than 3 million app downloads in January with downloads continuing despite the outrage over trading restrictions. Despite being an exchange for assets built on the ethos of decentralization, Coinbase, a centralized exchange, is one of the largest regulated cryptocurrency exchanges in the U.S. by trading volume.
As we’ve seen time and time again, users are willing to give up control in exchange for convenience. But we don’t believe the events over the last few weeks will be forgotten. The call for true democratization of finance is in the air, and we anticipate traders paying more attention to decentralization, the technology behind cryptocurrencies, and moving towards applications that accurately protect the democratization of finance through design.
We believe technology innovations that are built to protect against market manipulation and give greater control to the individual will come out on top.
It’s why the Horizon team is so passionate about our upcoming global stock exchange and trading app, Upstream, a joint venture between Horizon and MERJ Exchange expected to launch Q1 of 2021 that we believe will offer the best of stock trading and blockchain technology.
Upstream is an exchange and retail trading app with best bids and offers secured using the Ethereum public blockchain. Investors of all levels will be able to buy, sell, and settle securities directly from the Upstream trading app.
It’s an investor-driven market so it differs from many of today’s retail marketplaces where pricing relies on market makers and routing order flow. Traders will be given direct access to the exchange. No market makers, no routing order flow, and predatory market practices like short selling will be proactively prevented on Upstream.
There are varying degrees of decentralization when it comes to blockchain-powered markets. Upstream is decentralized, but with guardrails in place to protect investors.
Upstream traders will hold their securities on their phones and control any and all transactions. This is critical as most other trading accounts in both cryptocurrency and traditional markets create “central” honey pots of assets and data that are susceptible to hackers. We empower the investor to manage their securities as simply as they would manage their bank accounts and other payment applications.
We believe Upstream will create an honest and accessible marketplace and we look forward to entering the race with a retail trading app and investment experience that truly levels the playing field for the everyday investor.
About Upstream:
Upstream is a global marketplace for crowdfunded securities. Powered by Horizon’s proprietary matching engine technology, the exchange will enable investors to trade shares in high-growth startups and other unique asset classes directly from the trading app. Interested issuers can apply at https://upstream.exchange. Reach the team at hello@upstream.exchange.
About Horizon:
Horizon is a fintech company that builds and powers global securities exchanges with an integrated suite of software for compliant issuance, management, and secondary trading of securities. Its in-house solutions combine Wall Street and Silicon Valley to power the next generation of securities offerings and trading in the U.S. and globally. Learn more at https://www.horizonfintex.com/.
