In today’s Exponential Investor

  • Robinhood rises (nearly) vertically
  • How to trade with the best trader
  • Doing a #3860: what does that mean?

LONDON, UK

Robinhood (NASDAQ:HOOD) stock surged on Tuesday and Wednesday.

“Surged” doesn’t even do the rise justice.

Exploded or “mooned” are perhaps more apt descriptions.

The stock was 24% higher on Tuesday, and on Wednesday it again shot out the blocks with double-digit rises.

That puts the stock on a sharp trajectory to surpass $60.

Considering it was trading at an all-time low (the stock is not even a week old) of $33.25 last week that’s impressive.

But why is Robinhood’s stock flying fast and high?

This question is particularly pertinent considering that it reported a fall in its payments from order flow (PFOF) which has historically been its primary source of revenues.

Robinhood’s order flow payments were down 23% in the second quarter. And the company attracted incredible social outrage when it shut down access to certain “meme stocks” for trading a couple of months ago.

This helped the market to understand that Robinhood is not really about helping everyday people invest in stocks. What it is about is selling order flow data to enable the market to have an advantage over its customers.

Incredibly, that hasn’t seemed to kill off the Robinhood users.

Trade on Robinhood, kill some Arctic foxes

Traders on Robinhood simply don’t seem to mind that Robinhood is actively undermining their trades by selling the order flow data.

It’s astonishing really. And it may still yet prove to be Robinhood’s undoing.

Personally I can’t understand why you’d continue to use Robinhood considering the action it took in restricting trades, but continuing to sell the order flow.

The only parallel I can think of would be akin to a climate change warrior driving around in a diesel truck for the daily school run, leaving it to idle on the face of an Arctic fox while the warrior burned some trees at the park.

It seems the user experience is far more powerful than user profits.

Nonetheless, what has helped Robinhood with its PR troubles and its drop off in order flow payments, is crypto.

Robinhood has offered crypto trading for a while. Just not with any great depth like it does with stocks. In the fourth quarter of 2020 it had around 1.7 million users trading crypto.

In the first quarter of 2021, that exploded (seem to use that word a lot with Robinhood) to 9.5 million. Also, that helped the company to bring in six million new customers in just two months of the year.

It seems that Robinhood, once a stocks trading app, is more and more becoming like Coinbase, a crypto trading app.

All this and a surge in stock price begs the question, should you be considering Robinhood stock, or is it too late?

Well trading the stock on swings like that could be beneficial if you know how to make the right trades at the right time on the right catalysts.

Now I don’t profess to be a great trader. In fact, I’d probably suck at it if I really tried. I’m an investor, and that suits me just fine. But there are plenty of traders out there: just look at those Robinhood numbers for example.

To my mind though, there’s only one person I’d turn to if I wanted to get the right trading information on what to buy, when to buy and how to buy it to maximise your profits from those plays.

I can’t tell you his name, that’s going to breach a bunch of confidentiality clauses. But I can tell you over his career he’s managed billions of dollars in wealth and been one of the most successful traders we’ve ever seen at Southbank Investment Research.

If you want access to his trades and a peek inside his inner sanctum, I suggest you head here to find out more.

Doing a #3860

A CryptoPunk is a piece of digital art that is represented by a non-fungible token, an NFT.

They have become the most sought after NFTs in the world.

They have been artistically critiqued to be of cultural significance.

And they are selling for insane money in the NFT market.

For example, since I’ve been writing today’s Exponential Investor, two CryptoPunk NFTs have sold in the market. One went for 73 ETH (around $182,000) and one for 42 ETH (around $105,000).

When first created a few years ago, you could get a CryptoPunk for free – plus only a small transaction fee on the Ethereum network, which was about 10 cents back then.

How times have changed…

The highest sale price for CryptoPunk #3100 was 4,200 ETH (around $7.58 million) in March this year.

That CryptoPunk is back on the market asking over $90 million at the moment.

However, this market isn’t all it may seem to be.

You see, there are rumours it’s being used for massive tax evasion. People selling NFTs for huge losses in order to scoot around some tax obligations.

Maybe that’s the case or maybe the owner of CryptoPunk #3860 is just an idiot.

CryptoPunks are selling for hundreds of thousands of dollars, sometimes millions of dollars.

However…

… #3860 just sold on Wednesday for approximately $0.000001.

Oh dear.

This is one market to keep an eye on.

Around the corner there is a possible continuation to the mega-boom…

… or a spectacular bust.

In any event, this episode has already given the crypto community a new phrase for use in Twitter and other social media.

A huge mistake – or a major stuff-up – is “doing a #3860”.

Until next time…

Sam Volkering
Editor, Exponential Investor