Note: Shows data from TD Ameritrade and Charles Schwab until entities combined in Oct. 2020; Data: Company filings, Nasdaq; Chart: Jared Whalen/Axios
If 2021 was the big year for the swarm of at-home traders banding together, 2022 will be the big test for whether they stick around or abandon ship.
Why it matters: The wildest trading phenomenon in recent memory ushered in big changes that have — so far — had a lasting impact.
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The blistering rise of the retail trader handed struggling companies a lifeline, created the “meme-courting” CEO, and forced veterans on Wall Street to throw in the towel on companies they covered for decades.
“It may not look the same every quarter, but we will see people on social media continue to come together and invest as a community,” says Devin Ryan, an analyst who covers investing apps like Robinhood and Coinbase for JMP Securities.
Where it stands: At-home investors aren’t trading nearly as much they were at the height of the Reddit-fueled mania nearly one year ago — but they are still more active than at any other point before the pandemic hit, according to monthly data from some retail brokerage firms.
That doesn’t include activity on Robinhood — which exploded in popularity among Reddit traders — that would no doubt push those figures even higher. (They only released monthly trading data on their platform once, in June 2020.)
By the numbers: Robinhood’s monthly active users (its preferred gauge of retail trader engagement) fell to 19 million in its most recent quarter — roughly 2.4 million fewer than the prior quarter. But that’s still over 8 million more users than the same time in 2020.
And in a nod to the crazy cryptocurrency activity among at-home traders, crypto trading topped stock trading as their second-biggest source of transaction-based revenue (options trading is the first).
Flashback: The ground was fertile for the retail trading explosion.
An epic race-to-the-bottom on trading fees meant that by the end of 2019, most online brokerages were charging $0 to trade stocks and options. So if costs prevented more trading activity, “free” removed that barrier.
Then the pandemic left stuck-at-home Americans with nothing to do and “stimmies” gave them extra cash to invest. Apps like Robinhood made it easy (and even game-like) to get in on the budding market frenzy buoyed by unprecedented Fed support.
What to watch: “If the market starts to turn, I wonder if that dampens retail trader enthusiasm,” says Christian Bolu, an analyst at Autonomous.
Go deeper: Meme stock hype dies down
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