Cantor Fitzgerald analyst Ramsey El-Assal highlights prediction markets as a key growth driver for Coinbase (COIN) and Robinhood (HOOD), shifting investor focus from the weak first quarter in crypto trading to future product developments. El-Assal notes that investors are increasingly adopting a forward-looking perspective, concentrating on demand trends and upcoming offerings such as prediction markets.
Both companies anticipate softer results for Q1 2026 due to declining cryptocurrency prices and trading activity. Bitcoin (BTC) and ether (ETH) fell by approximately 23% and 29%, respectively, reducing volumes across exchanges. Coinbase’s trading volume decreased from about $66 billion in January to $54 billion in March, according to external data. Cantor estimates that Coinbase’s consumer and institutional trading volumes were $35 billion and $167 billion, both below Wall Street expectations. Despite projecting exchange revenue under consensus, El-Assal maintains an “overweight” rating on the stock with a price target increase to $250, citing improved sentiment and long-term growth drivers.
Robinhood is also experiencing short-term pressures, expecting volume declines due to weaker market conditions and reduced net interest revenue from lower rates. However, its business model may provide some buffer, as higher volatility can enhance trading margins, and Cantor foresees stronger yields in equities and options offsetting decreased activity.
Crypto revenue quality for Robinhood could be impacted by its tiered pricing structure, which generates lower yields on large active traders but higher yields on marginal traders. The latter group tends to withdraw during periods of volatility.
Despite these challenges, both stocks have seen rallies recently. Coinbase shares have risen about 18% since the start of the quarter, while Robinhood has increased roughly 40% in April from its late-March lows, driven by better risk sentiment and reduced geopolitical tensions.
Looking ahead, investors are watching for regulatory developments and new business lines from both companies. Coinbase’s prediction markets launched this year have garnered significant interest, according to El-Assal. Meanwhile, Robinhood is focusing on prediction markets along with tokenization and private market access initiatives. Regulatory changes, including updates to pattern day trading rules, might also spur future growth.
Cantor maintains an “overweight” rating on Robinhood and has raised its price target to $110. According to El-Assal, while current trading trends are linked to crypto price cycles, the next phase of growth will likely hinge on product expansion and new use cases.
On Tuesday, the New York Attorney General’s office filed a lawsuit against Coinbase and Gemini over their prediction market offerings, alleging they constitute gambling products in violation of state regulations. The classification of sports-related prediction markets as gambling is under debate in both state and federal courts. The Commodity Futures Trading Commission argues these are swaps and thus federally regulated, while states contend certain contracts should be licensed by state authorities. This issue may eventually reach the U.S. Supreme Court.