Robinhood Markets' May Surge: Retail Momentum and Crypto's Rising Tide?

Retail trading platform Robinhood Markets, Inc. has reported its May 2025 operating metrics, offering fresh insights into the health of retail investor sentiment and crypto adoption. The data reveals a mixed picture: robust year-over-year growth across key metrics contrasts with softer month-over-month trends, while crypto's contribution to revenue continues to expand. For investors, the question is whether these signals point to sustainable momentum or fleeting enthusiasm.

Retail Sentiment: A Resilient Base Amid Churn

Robinhood's funded customer base grew to 25.9 million in May, up 1.8 million from May 2024 but barely 5,000 from April. This flattish monthly growth occurred despite the escheatment of roughly 100,000 low-balance accounts, a process that reduces inactive users but risks dampening net additions. Still, the year-over-year expansion underscores resilience in retail engagement.

Trading activity tells a stronger story. Equity notional volumes surged 14% month-over-month and 108% year-over-year, while options contracts jumped 36% annually. Daily Average Revenue Trades (DARTs) in equity and options rose 15% and 50% year-over-year, respectively, signaling heightened speculative activity. Margin balances hit $9.0 billion—a 100% year-over-year increase—suggesting investors are leveraging trades, which amplifies both risk and revenue for Robinhood.

Crypto's Role: A Key Growth Lever

The most striking development lies in crypto. May's crypto notional trading volume hit $11.7 billion, up 36% month-over-month and 65% year-over-year. Crypto DARTs grew 67% year-over-year, outpacing all other asset classes. This surge aligns with Robinhood's pivot toward crypto as a high-margin revenue driver, particularly through trading fees and securities lending.

Securities lending revenue, which includes crypto, reached $33 million in May—up 43% year-over-year. This suggests Robinhood is successfully monetizing its crypto assets, though the segment's contribution to overall revenue remains unclear.

Risks Lurking Beneath the Surface

Not all metrics are glowing. Net deposits fell to $3.5 billion in May from $6.8 billion in April, with Robinhood attributing the decline to the exclusion of TradePMR's results (acquired in February). While the year-over-year deposit growth of 44% is strong, the sequential drop raises questions about retail cash flow dynamics.

Insider selling also casts a shadow. CEO Vladimir Tenev and other executives sold significant shares in May, as did institutions like Galileo PTC Ltd, which exited entirely. Though insider selling isn't inherently negative, it may signal caution among insiders about near-term valuation. Analysts, however, remain bullish: 8 “buy” ratings and a median $69 price target (vs. HOOD's current ~$52) suggest optimism about long-term prospects.

The Investment Case: Momentum vs. Valuation

Robinhood's May data reinforces its position as a beneficiary of retail trading's enduring popularity. The crypto boom, in particular, offers a pathway to diversify revenue beyond volatile equity markets. The June 2 acquisition of Bitstamp—adding 500,000 funded customers—could further boost crypto-centric metrics, though its impact won't be reflected until June's results.

Yet risks linger. A sustained deposit slump could crimp fee-based revenue, while margin debt growth hints at vulnerabilities if markets retreat. Valuation remains a hurdle: HOOD trades at roughly 4x its trailing 12-month revenue (excluding Bitstamp), which may be rich if growth slows.

Conclusion: Buy the Trend, but Mind the Risks

Investors should view Robinhood as a play on two trends: retail trading's persistence and crypto's mainstreaming. The May data supports buying the stock if the company can sustain year-over-year momentum and integrate Bitstamp smoothly. However, the stock's current multiple demands continued acceleration. Monitor net deposits closely—they're the canary in the coal mine for retail enthusiasm.

For now, Robinhood's May performance suggests it's navigating choppy waters with resilience. But as markets evolve, so must its ability to convert crypto's rising tide into consistent value.