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Recent turbulence in the cryptocurrency market is casting a shadow over the future of Robinhood stock (NASDAQ:HOOD). With the possibility of further declines in the crypto sector and the excessively high valuation of Robinhood stock, it may be time to consider parting ways with your HOOD shares.
An additional cause for concern is the potential for a 10%-15% downturn in U.S. stock markets in the coming weeks, adding to the bearish sentiment surrounding Robinhood stock.
HOOD Vulnerable to Cryptocurrency Market Fluctuations
On April 11, Citi downgraded its rating on HOOD stock to “sell” from “neutral,” attributing a significant portion of the stock’s 44% 2024 gains to the rise in Bitcoin prices.
However, recent drastic declines in Bitcoin and Ethereum prices, combined with Federal Reserve President Neel Kashkari’s critical comments on cryptocurrencies, suggest a possible regulatory crackdown on digital assets in the near future.
Given the close relationship between Robinhood stock and the performance of cryptocurrencies, a continued bearish trend in the crypto market could lead to a substantial decline in HOOD stock.
Robinhood’s High Valuation and Market Uncertainties
Despite a 7.4% drop in HOOD stock in the past five days, the company carries a heavy price-sales ratio of 8.6 times and an elevated forward price-earnings ratio, signaling overvaluation.
The looming possibility of a 10%-15% correction in U.S. stocks due to various negative catalysts such as geopolitical tensions, rising interest rates, and persistent inflation levels further clouds the short-term outlook for Robinhood stock.
Considering that Robinhood’s revenue heavily relies on stock trading activity, any significant downturn in the stock market could lead to a notable decline in the company’s stock price.
CEO and Investor Selling Adds to Pressures
Intensifying concerns around HOOD stock are the substantial sell-offs by both CEO Vladimir Tenev and prominent investor Cathie Wood in recent weeks, indicating diminishing confidence in Robinhood’s future.
Tenev’s sale of 500,000 shares and Wood’s disposal of 1.6 million shares paint a grim picture for the company’s prospects, suggesting insider skepticism about its trajectory.