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A crypto crash hurt Robinhood stock on Monday.
A crypto rebound is driving Robinhood stock back up on Tuesday.
What goes down must come back up. This is the hope of cryptocurrency traders -- and also of Robinhood (NASDAQ: HOOD) investors.
Yesterday if you recall, Robinhood stock tripped and fell more than 4% after traders sold off cryptocurrencies such as Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and especially Solana (CRYPTO: SOL). Worries that China might crack down on "illegal activities involving" stablecoins spooked crypto traders, and because crypto trading is the fastest growth segment of all trading at Robinhood, investors in the online brokerage worried a rush to the exits in crypto could hurt Robinhood's growth rate.
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But what happens if crypto traders don't flee the market?
Image source: Robinhood Markets.
That's what stock investors may be mulling this morning, as Bitcoin prices bounce back 7.5%, recovering all of yesterday's losses and more, while Ethereum and Solana record even stronger gains (up 9.6% and 12.8%, respectively).
If you ask stock investors, this must be good news for Robinhood as well, and the online brokerage stock is up 2.9% through 12:10 p.m. ET.
In last month's Q3 earnings report, Robinhood credited crypto trading as the primary reason its revenue more than doubled year over year. In Q2, crypto trades provided as much as 30% of "transaction-based revenue," and in Q3, crypto volume more than doubled sequentially.
Clearly, crypto is driving Robinhood's value at the moment. For that reason, today's quick rebound in crypto trading has to be seen as a positive for Robinhood stock.
Admittedly, at a stock price 53 times trailing earnings, Robinhood shares look expensive. As long as the cryptocurrency rollercoaster keeps traders engaged, and trading on the platform, though, it's possible Robinhood's growth rate can still justify the price.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.
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