Robinhood
What is Robinhood?
When the world was in the midst of losing their jobs, hobbies and ability to even their houses, an app called Robinhood emerged into popularity. As the title suggests, Robinhood is known for its simplicity in trading stocks within a matter of seconds, with the possibility of getting rich fast. First time traders were able to get accustomed to the app and the stock market with the way that Robin Hood created its’ app. It was made to feel as fun game for adults that earns them money. Robin Hood first became popular for its zero commission fees, and for young investors to feel like they have the power to trade and make their own decisions on how to invest money.
Who were the investors?
Half of new Robin Hood’s customers this year or first time investors with a mostly millennial aged customer base. Twitter, TikTok, and Instagram blew up with information about Robin Hood, which sparked the viral surge towards a financial app for the first time. TikTok videos under #robinhoodstocks have more than 8 million views. With everyone losing their jobs, Robinhood and the stock market was a fun way to increase profits as a side hustle. With live sports cancelled, people would log into Robinhood as a way to replace the rush from sports betting. It was simple, stay-at-home app, that required no energy or fees other than simply logging on from your phone.
Shown below is Robinhood’s usage over the spam of the last two years.
As shown above Robinhood had an increase of usage around the time corona hit at first, with a particularly large spike in January 2021. This spike seems to be a short-term growth and easily explainable due to the controversy surrounding robinhood over the past few months.
Popularity with stocks
In January, a Reddit account found an opportunity to make money, and started posting about GameStop, AMC, and other dying companies. This was mostly a slap in the face to hedge funds and Wall street. The idea was for companies worth nothing to go up in price, and therefore making Hedge funds lose a lot of money. This would explain the spike in January, because this Reddit account became viral and traders, including first-timers, were rushing to buy those stocks on Robinhood.
Where Robinhood went wrong
As stocks skyrocketed, On January 28th, Robinhood released a statement that they would be stopping all orders on GameStop and AMC.
This angered a lot of people including the subreddit that was behind creating this idea of buying shares from a dying company. It felt to traders, that Robinhood was tailered towards the rich who influenced the stock market more. The subreddit twitter account posted,
“Individual investors are being stripped of their ability to trade on [the Robinhood app]. Meanwhile, hedge funds and institutional investors can continue to trade as normal.”
Robinhood explained the reason for the restriction on GameStop and AMC, was because of the $3 billion order they were unable to complete at that time. The same afternoon of the new restriction, they made a new statement saying they would allow limited buys of those company stocks starting the next day. Close to a week later Robin Hood increase the maximum shares a lot for all the companies up to 500 shares total, other restrictions are still in place.
This controversy, however, wasn’t enough for people to want anything to do with the app anymore. Many users deleted the app and moved to what they considered more trustworthy stock trading apps. Many lawsuits were filed, and the app was associated with helping the rich become richer, and discrimination of a sort.
Will Robinhood make it?
Even as Robinhood users dropped, and their company name dragged in the dirt the company seems to have kept quite a lot of users. It doesn’t seem that the growth it had received during Covid would last for that long. Many first-time investors were introduced to the app as a fun new hobby, but with the world opening back up, it would be logical to assume most of them would be done with the app soon. The way to maintain the growth Robinhood should find incentives and innovations for users to keep using the app. Now that many companies copied the free trading idea, it makes it easy for customers to choose other apps to open new account with. Robinhood needs to find a balance of keeping the stock trading app fair to all parties, without letting the stock market get out of control. Robinhood as an idea is brilliant, but to maintain growth, they would need to work on earing investors trust back.
