FTX Collapse Could See Robinhood Follow in Its Footsteps

The FTX exchange has taken down several exchanges and other companies. Could Robinhood be the latest casualty?

The collapse of FTX, which was once the second-largest exchange in the world, has eaten away several other companies and protocols. Investors have lost billions of dollars with direct or indirect exposure to FTX. But is the stocks and crypto investing platform – Robinhood the latest casualty?

Robinhood in Trouble?

The overall global market conditions and crypto winters have severely impacted the price of Robinhood stocks (HOOD). It is down 88% from its all-time high in Aug. 2021.

According to CNBC reports, Christopher Allen, the analyst at Citi Group, has downgraded the stock to neutral from a buy stance. However, the analyst sees long-term potential in HOOD stocks. He mentions in a note to clients:

“We see a mixed outlook from here given potential headline risk from upcoming SEC market structure proposals, a cautious equity market outlook, and potential fallout from FTX impacting crypto trading revenues and the customer base.”

Sam Bankman-Fried bought a 7.6% stake in Robinhood earlier this year. Hence there is a fear that the position might get liquidated anytime soon. However, the CEO of Robinhood, Vlad Tenev, told CNBC that Sam’s stake would get locked up in bankruptcy proceedings. The Bahamian authorities arrested the disgraced founder today.   

The next FTX?

Earlier this month, Robinhood introduced an Individual Retirement Account (IRA) plan with a 1% match. The IRA Match is an extra 1% that Robinhood adds to customers’ IRA for making eligible contributions and locking them for at least five years.

The community speculates liquidity issues with Robinhood because it is desperately trying to make customers lock their funds with it.