Valuation is an art, not a science.

Written by: Eric, Foresight News

On April 29, Beijing time, Robinhood announced its financial status for the first quarter after the U.S. stock market closed.

Robinhood's cryptocurrency-related revenue for the first quarter was $134 million, with nominal trading volume within the app reaching $24 billion, a year-on-year decrease of 47% and 48%, respectively. Although cryptocurrency trading data saw a decline, Robinhood made up for the shortfall in other areas, with overall trading revenue growth of 7% year-on-year to $623 million in the first quarter, mainly driven by a 320% increase in event contract revenue. Additionally, revenue from options and stocks was $260 million and $82 million, respectively, increasing 8% and 46%.

Overall, Robinhood's revenue for the first quarter was $1.07 billion, a year-on-year increase of 15%; net profit was $346 million, up 3% year-on-year. While it cannot be classified as impressive, the overall single-digit growth is indeed commendable, especially considering that the cryptocurrency trading data, which propelled the stock price rise, was nearly halved.

However, what really caused Robinhood's stock price to drop nearly 10% after hours was the high expenses incurred for promoting the "Trump account." Robinhood stated that the company's expenditures surged 18% in the first quarter and warned that its "Trump account" promotion plan would require an additional investment of $100 million. Furthermore, Robinhood indicated that the contracts offered for such accounts were based on a cost-plus model, resulting in lower profit margins.

The so-called "Trump account" is an account set up for American children under the "Big and Beautiful Act," with Robinhood acting as the broker and initial trustee.

For this company that has one foot in the crypto world, the discussion point for CT is not the stock price and performance, but the fact that this once-popular brokerage has seen revenue from its cryptocurrency business that does not even compare to Hyperliquid.

An analyst from Blockworks named Shaunda Devens visually demonstrated the comparison of data between Robinhood and Hyperliquid through a chart.

Due to the diversification of business, many data points are not highly comparable. However, in cryptocurrency trading, while both Robinhood and Hyperliquid saw their first-quarter revenues decline by over 30%, Hyperliquid's revenue from cryptocurrency trading has approached $180 million, while Robinhood's was only $134 million.

In terms of overall profits, Robinhood's net profit in the first quarter was $346 million, while Hyperliquid's total revenue from its protocol was about $192 million. Although it is impossible to know Hyperliquid's cost structure, this figure is likely not very high, and its net profit could reach at least more than half of Robinhood's $346 million.

Many supporters of Hyperliquid on X believe that Hyperliquid is severely undervalued. Robinhood has far more users than Hyperliquid, and its fees are also higher than Hyperliquid's. Even under these circumstances, Robinhood's price-to-earnings ratio based on first-quarter data exceeds 50 times, while Hyperliquid's is less than 30 times.

Another researcher from Blockworks raised some doubts about this, noting that Hyperliquid's token FDV reached $39 billion, and if this figure were used for calculations, everything seems reasonable.

Opponents argue that using FDV to value the project is akin to using the future stock that Robinhood may issue to value Robinhood itself. An X user named "On-chain Chemist" also stated that valuation has always been an art, not a science.

How to value an on-chain project has always been a topic worth discussing. DeFi projects like Hyperliquid are relatively easier to value among on-chain projects, as often a vague range can be derived by comparing them to brokerages in the stock market. But the reason it is termed vague is that it is difficult to delve deeply into the details.

DeFi project regulations are lenient, with no tax pressures and unrestricted leverage, partially meeting speculative demand. However, how this speculative demand will manifest its patterns is the core reason why it is currently difficult for the market to estimate the future revenue of projects. In addition, the relationship between a project's token and the project itself does not currently have a very clear definition; buying stock in Robinhood makes you a shareholder to some extent, but buying Hyperliquid's tokens seems to provide no actual power over the Hyperliquid project itself.

Using chains to settle transactions is a significant advancement that Web3 brings to the world; in the future, more cases like Hyperliquid that exceed the profitability of companies may continue to emerge, but how to value these emerging platforms may be, as previously mentioned, not a science but an art.