Bankman-Fried takes 7.6% stake in Robinhood

Bankman-Fried takes 7.6% stake in Robinhood

Bankman-Fried takes 7.6% stake in Robinhood

In what could lead to a further blurring of the lines between traditional and digital asset markets, the founder of cryptocurrency exchange FTX has taken a 7.6% stake in stock trading platform, Robinhood.

For Robinhood shareholders, this may prove very interesting from a financial perspective as it could portend an attempt to take the company private. There was a 28% rise in Robinhood Markets (HOOD) shares as news of Bankman-Fried’s stake in the company emerged late last week.

In what appears to be a response to the development, Robinhood took to Twitter: “Of course, we think it is an attractive investment too” . . “We’re doubling down on creating a multi-generational company where customers can build wealth for their generations”.

Market crossover

For those of us that follow cryptocurrency and digital assets, the stock purchase could prove an interesting development as it signifies yet another way in which  crypto is meshing into traditional financial markets.

The last few years have seen the big online brokers start to dip their toes in the cryptocurrency market. Robinhood itself - as an app that claims to democratize finance - has led the pack with commission-free crypto trading since 2018. Earlier this month, online brokerage Firstrade added the facility to trade 37 tokens on its platform.

There are also a number of equities listed on the conventional markets that provide exposure to the digital assets space. It’s possible to buy stocks in Coinbase, Block, MicroStrategy, Grayscale and a range of crypto miners. At the Crypto Bahamas event (which FTX sponsored) last week, Shark Tank personality “Mr. Wonderful” stated that he believed cryptocurrency would “become the 12th sector of the S&P”.

The question that arises in considering Bankman-Fried’s recent purchase is that as we’ve seen some movement from equities trading into crypto, is this a move in the other direction?

Tokenized stocks

We will have to wait and see if the FTX founder decides to up his stake in Robinhood. However, it’s interesting to note that FTX is one of the few cryptocurrency trading platforms that offers tokenized stocks.  A tokenized stock is essentially the same thing as a share in a publicly traded company. The difference is that it brings that stock on-chain in the form of a digital token.

In May 2021, Exodus became the first company to launch tokenized class A common stock on the Algorand blockchain. The tokens (which trade under the ticker EXIT) act as a digital representation of genuine shares in the Exodus company.

It has long been speculated that the not so distant future could see the traditional trading platforms evolve into blockchain-based financial platforms. The logic behind such a development would be to provide a more convenient means of trading for people. A blockchain stock market could be permissionless, making it accessible to anybody regardless of nationality, income level or credit rating - globally.

We can only second-guess Bankman-Fried’s intentions in this instance but don’t be surprised if tokenization of stocks within traditional markets forms part of his vision.

This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

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