# Robinhood, Coinbase find sanctuary in interest income amid market rout Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-11-02 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: How U.S. Online Trading Firms Can Boost Revenue Amid Rate Hikes Meta Description: Discover how the U.S. Federal Reserve's rate hikes can drive up your interest income for commission-free trading and cryptocurrency exchange. Get ahead in URL: https://financedigest.com/robinhood-coinbase-find-sanctuary-in-interest-income-amid-market-routhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-11-01t171328z1lynxmpeia01lprtroptp4ukraine-crisis-coinbase-1736814936517-compressed.jpg) By Niket Nishant and Manya Saini (Reuters) – For U.S. online trading companies an often-overlooked financial metric could act as a bulwark against softening demand in the [third quarter](https://www.financedigest.com/greek-residential-property-price-recovery-picks-up-in-third-quarter.html "Greek residential property price recovery picks up in third quarter"), according to analysts. The U.S. Federal Reserve’s [rate hikes](https://www.financedigest.com/uk-economys-unexpected-bounce-spurs-more-boe-rate-hike-talk.html "UK economy’s unexpected bounce spurs more BoE rate hike talk") are expected to drive up interest income for commission-free brokerage Robinhood Markets Inc and cryptocurrency exchange Coinbase Global Inc. While [rates were low and crypto markets](https://www.financedigest.com/no-santa-rally-for-markets-as-central-banks-dampen-peak-rate-hopes.html "No Santa rally for markets as central banks dampen peak rate hopes") were hot, investors paid little attention to (interest income), but it is becoming an increasingly important driver for Coinbase’s revenue stream,” Barclays analysts wrote. The impact of higher rates will flow through [earnings at a rate slightly better than previously forecast,”](https://www.financedigest.com/centrica-names-obrien-as-new-cfo-raises-earnings-forecast.html "Centrica names O’Brien as new CFO, raises earnings forecast") J.P. Morgan analysts said of Robinhood. THE CONTEXT Central [banks around the world have been scrambling to cool the economy in an attempt to tame inflation](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel"), which despite several rate hikes this year, is still raging at levels not seen in four decades. That has led to a stunning reversal in fortunes for lenders squeezed by near-zero [interest rates](https://www.financedigest.com/ecbs-centeno-says-interest-rate-close-to-peaking-if-no-new-shocks.html "ECB’s Centeno says interest rate close to peaking if no new shocks") last year. Robinhood allows eligible [customers to borrow money to purchase](https://www.financedigest.com/britains-nationwide-curbs-cryptocurrency-purchases-by-customers.html "Britain’s Nationwide curbs cryptocurrency purchases by customers") securities and charges an interest on the debt. Analysts say the feature, [called “margin](https://www.financedigest.com/europe-power-firms-need-1-5-trillion-euros-in-margin-calls-equinor-says.html "Europe power firms need 1.5 trillion euros in margin calls, Equinor says") investing”, can also be used to drive greater subscriptions to its premium Robinhood Gold as members can borrow money much more cheaply than the standard rate. We [see Robinhood lifting rates to levels](https://www.financedigest.com/fraport-sees-2023-passenger-traffic-at-80-90-of-pre-pandemic-levels.html "Fraport sees 2023 passenger traffic at 80-90% of pre-pandemic levels") not that different from peers,” J.P. Morgan added. On the other hand, Coinbase earns interest on reserves backing USD Coin (USDC), the second-biggest stablecoin by market capitalization, which it issues jointly with [crypto firm](https://www.financedigest.com/uk-watchdog-warns-crypto-firms-to-prepare-for-advertising-rule-change.html "UK watchdog warns crypto firms to prepare for advertising rule change") Circle. It also earns interest on bitcoin-backed loans it [provides to customers](https://www.financedigest.com/banks-can-provide-a-protective-shield-to-defend-customers-from-cyber-attack.html "Banks can provide a protective shield to defend customers from cyber attack"). Analysts [expect net interest revenue](https://www.financedigest.com/russias-gazprom-expects-increase-in-2022-revenue.html "Russia’s Gazprom expects increase in 2022 revenue") at Robinhood to surge 65%, while Coinbase’s subscription and services revenue, which includes interest income, is estimated to grow 28%, according to IBES data at Refinitiv. The companies are, however, also expected to report a decline in overall third-quarter revenue, as inflation-battered retail traders sought refuge in [cash instead of betting on risky assets](https://www.financedigest.com/analysis-investors-face-expensive-quest-for-year-end-cash-and-safe-assets.html "Analysis-Investors face expensive quest for year-end cash and safe assets"). Robinhood is due to report third-quarter results after the bell on Wednesday, while Coinbase is [set to follow](https://www.financedigest.com/inovus-medical-set-major-expansion-following-six-figure-investment.html "Inovus Medical set for major expansion following six figure investment") on Thursday. (Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Shounak Dasgupta) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---