The crypto market is no stranger to volatility, but in recent weeks we’ve seen a very strange bullish divergence from the markets. While cryptocurrencies like Bitcoin, Ethereum, and Solana have experienced downturns, crypto-related stocks such as Robinhood and Coinbase have shown significant resilience and even soared. Written by Eleanor Brooks, a veteran blockchain researcher with BlockchainShock, it deep dives into the key drivers of outperformance and provides an overview of revenue creation, clarity in the regulatory landscape, and change in investor sentiment. BlockchainShock is dedicated to cutting through the noise with quality analysis and insight, so you can get a clear picture of this exciting developing world.
Understanding the Divergence
The crypto market took a substantial turn for the worse, with losses averaging 30% by the end of March. Bitcoin—the bellwether of the crypto world—dropped by as much as 5.5%, hitting its lowest point in 2025. This downturn can be attributed to various factors, including US President Donald Trump's tariffs on approximately 90 countries, which have injected uncertainty and risk aversion into the market. Continuing macroeconomic uncertainty and bad geopolitical conditions are adding to the volatile and very cautious conditions around crypto.
Even amid the deep digital asset market downturn, certain crypto-indexed equities have bucked the trend, producing noteworthy market performance. This divergence reveals a fundamental difference in how these entities bring in revenue and in how investors view their risk profiles. Firms such as Robinhood and Coinbase have made their fortunes inextricably tied to the state of the crypto market. Unlike centralized firms, they are insulated from downturns because all their revenue comes from highly active, volatile markets.
Investor sentiment plays a crucial role. As Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted, "High risk-off sentiment is canceling out optimism about a more clement environment for coins." Investors are turning to safer and regulated assets amid increasing levels of uncertainty. This trend serves to further advantage publicly traded companies, putting the more dynamic cryptocurrency market at a distinct disadvantage.
Revenue Generation and Business Models
Tether and Circle are close to printing money with their revenues while the other crypto stocks are largely dependent on endless cycles of venture financing. As an example across sectors, companies like Robinhood and Coinbase both make money primarily off transaction fees, subscription services, and custody of crypto assets. These businesses are tremendously profitable even in down markets. Unlike crypto, which needs price appreciation to be profitable, they flourish as long as trading volume continues to be robust.
It’s no surprise, then, that Robinhood announced a staggering $252 million in revenue from crypto trading last quarter. That was a 30% decrease from the last quarter. Crypto trading volume on Robinhood fell to $46 billion in the first quarter, declining from $71 billion at the end of 2024. Even with this decline, the still-record volume of transactions produced enough revenue for a record year. CEO Vlad Tenev has said that the company is serious about diversifying its offerings. This implementation strategy is meant to decrease dependence on crypto trading revenue in isolation.
Coinbase, the crypto stock industry bellwether, brought in only $750 million in trading revenue. Either way, this remarkable average belies their dominance from the start of 2025 through February 11. The company’s revenue streams are disproportionally tied to trading volumes, an activity the company likely wants to incentivize. This tactic protects it from the downstream effects of price drops in individual cryptocurrencies. As Dan Dolev, a senior analyst at Mizuho Securities, aptly put it, "Where Bitcoin goes, Coinbase’s stock follows," indicating a correlation but not necessarily a causal relationship.
Regulatory Clarity and Institutional Adoption
A second key reason fueling the outperformance of these crypto stocks is the growing regulatory certainty around their businesses. Red flags Regularly scrutinized by regulators, publicly traded companies such as Robinhood and Coinbase may be subject to bitter attacks. This piece of regulation provides investors with a higher level of confidence than the mostly unregulated crypto market. This new regulatory framework is appealing to institutional investors who are otherwise fearful of investing directly into cryptocurrencies for compliance and regulatory reasons.
And of course, the regulatory environment is rapidly changing as governments around the world continue to try and figure out how to regulate cryptocurrencies and blockchain technology. For others, the crypto craze came like a calamitous tsunami. At the same time, many others continue to be conservative with their spending, fostering doubt and volatility in the market. Unlike crypto, crypto stocks play by set legal rules. This operational pedigree makes them a more attractive choice for institutional investors who may want to get exposure to the crypto markets.
Kraken’s recent announcement that it will soon begin offering stock trading is the latest example of this emerging convergence between traditional finance and the crypto world. This action by the Commission recognizes that the investing public desires greater choice of investments, all within a single product. It further muddies the waters between crypto exchanges and Main Street brokerage companies. The healthy competition between these platforms eventually leads to an overwhelmingly positive outcome for investors by spurring innovation and lowering the cost of trading.
Investor Sentiment and Market Dynamics
The mood of the market is arguably the most important indicator influencing the performance of cryptocurrencies as well as crypto stocks. When investors are feeling risk on during bull markets, they have a greater appetite for risk and thus push up prices of crypto. Conversely, during times of uncertainty, investors tend to flock to safer assets, benefiting crypto stocks that are perceived as less risky due to their established business models and regulatory oversight.
This increase is a dramatic illustration of how political developments can serve to influence investor perceptions. Similarly, UK neobank Revolut's record annual profit of $1.5 billion, largely driven by its crypto trading business, underscores the continued demand for crypto-related services despite market fluctuations.
Investors have been clamoring more than ever for stability and predictability in their investments. Accordingly, they are seeking refuge in crypto stocks rather than the higher risk and reward crypto space. Whether the entire market crashes, it doesn’t matter because the crypto stocks continue to be revenue generating. This resilience is what makes them such an attractive buy for investors seeking exposure to the crypto space without the risks that come with holding digital assets outright.
Navigating the Current Market
Developers and investors continue to wrestle with the new market realities. Investors need to seriously consider their own risk tolerance and investment goals before investing in cryptocurrencies and crypto equities. While cryptocurrencies are known for their potential for high returns, they come with considerable risk. These risks comprise price volatility, regulatory uncertainty, and security issues to name a few. For individual investors, crypto stocks provide a regulated way to get exposure. They’re a safer, more diversified way to enter the crypto market.
This difference between crypto equities and crypto assets illustrate how crypto is becoming a different market. Cryptocurrencies are an incredibly high-risk, high-reward investment. Crypto stocks, on the other hand, offer a more regulated and diversified means to seek exposure in this exciting new market. Knowing what’s behind this divergence is key. Particularly with the right investment strategies, investors can thrive in today’s market and position themselves for future victories.
- Diversify Your Portfolio: Allocate capital across different asset classes, including cryptocurrencies, crypto stocks, and traditional investments, to reduce overall portfolio risk.
- Conduct Thorough Research: Before investing in any cryptocurrency or crypto stock, conduct thorough research to understand the underlying technology, business model, and regulatory environment.
- Monitor Market Trends: Stay informed about market trends, regulatory developments, and macroeconomic factors that could impact the performance of cryptocurrencies and crypto stocks.
- Consider Dollar-Cost Averaging: Invest a fixed amount of money at regular intervals to smooth out price volatility and reduce the risk of buying at the top.
- Seek Professional Advice: Consult with a qualified financial advisor to develop a personalized investment strategy that aligns with your risk tolerance and investment objectives.
The divergence between crypto stocks and cryptocurrencies underscores the evolving nature of the crypto market. While cryptocurrencies remain a high-risk, high-reward investment, crypto stocks offer a more regulated and diversified way to gain exposure to the space. By understanding the factors driving this divergence and implementing prudent investment strategies, investors can navigate the current market and position themselves for long-term success.
