Investors’ risk tolerance was tested in early August.
The CBOE Volatility Index (^VIX), commonly known as the “fear index,” was hovering around 20 on Monday, remaining stable after briefly spiking to 65 on Aug. 5, its highest level since the 2020 pandemic-induced panic selling.
Amid the market turmoil, Robinhood noticed users evaluating their portfolios, but instead of selling, many investors added to their positions.
“One of the things we’ve seen so far in August is that there are more buyers than sellers,” Robinhood CEO Vlad Tenev told Yahoo Finance (video above). “That’s why we’re seeing so many deposits. Our clients, in general, are seeing this as an opportunity to increase their positions.”
Robinhood reported having 24.2 million customers as of June 30. The trading platform saw assets under custody reach $139.7 billion in the second quarter.
Tenev explained that the market decline highlights the variety of market participants on Robinhood’s platform.
“Advanced traders generally have sophisticated strategies they can exploit when markets are down or flat, so they see volatility as an opportunity,” Tenev says. “More buy-and-hold investors are typically saving for retirement and have a longer-term time horizon.”
In addition to options and stock trading products, Robinhood is also looking to grow further by focusing on historically volatile crypto assets. In the second quarter, Robinhood’s cryptocurrency division saw revenue soar 161% year-over-year.
“There are two more technological shifts impacting our space: artificial intelligence and cryptocurrency,” Tenev said. “Both have the potential to completely reshape how financial services are delivered to customers, both at the infrastructure level and at the service level. We think about it every day and are positioning Robinhood to succeed and be a leader in these two shifts.”
But Robinhood isn’t the only crypto-friendly trading firm: Morgan Stanley, for example, recently gave its advisors permission to offer a Bitcoin ETF to some clients.
“As you know, we already have a very large crypto business in terms of retail market share,” Tenev said, “and it continues to grow, and it’s kind of a dark horse in the space. Not many people think of Robinhood as a major player, but in the retail crypto space, we are one of the leaders in terms of market share, and it continues to grow.”
The story continues
Robinhood CEO Vlad Tenev in his office in Menlo Park, California, on July 15, 2021. (Courtesy of Robinhood, Kimberly White/Getty Images) (Kimberly White via Getty Images)
Meanwhile, as volatility continues to subside, investment strategists at major firms are plotting their post-turmoil strategies.
“What I saw early Monday morning [Aug. 5] “… This was a bit of a piggyback buy into a stock you like,” Stuart Kaiser, head of U.S. equity trading at Citi, told Yahoo Finance. “I don’t think this is a case of taking risk and gambling everything. This is a case of there being stocks or sectors or markets that you were originally going to own and then potentially buying into them, and I think that’s what’s happening now.”
A selloff in some highly valued tech stocks and other popular companies early last week has prompted some long-term bulls to buy in. UBS said that despite the lower valuations, fundamentals remain “solid” and these stocks could outperform.
“While volatility in tech stocks has been dramatic in recent days, we believe the global correction has revealed structural opportunities across many high-quality tech sectors,” Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, wrote in a client note. “Investors may want to consider building a balanced exposure to global tech stocks, with a moderate bias towards internet and semiconductor names.”
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