The global investment landscape is undergoing a significant shift as retail trading enthusiasm cools. What once was a surge in trading activity during the 2020–2021 market boom has now given way to declining interest, prompting fierce competition between cryptocurrency exchanges and traditional retail brokers.
With retail engagement in both stocks and digital assets tapering off over the past year, financial platforms are increasingly battling for market share. This shift is especially pressing for publicly traded firms that face stringent profit growth targets. As Nana Naumovic, Chairman of KlipC, noted, “Everyone is now competing for customers—especially listed companies—because their profit growth expectations remain high, even as retail interest in markets has declined over the last 12 months.”
The Rise and Slowdown of Retail Trading
The pandemic-era rally in stock and crypto trading brought unprecedented growth to brokerages and trading platforms. Retail investors flooded the market, driven by easy access, commission-free trades, and social media-fueled momentum around meme stocks and digital currencies. However, that wave has receded.
In 2022, despite record trading volumes and account openings across global brokerages, the momentum began to stall. Rising inflation and higher interest rates dampened investor appetite. According to KlipC’s analysis, trading volumes at traditional U.S. brokers dropped by 33% in the first quarter of 2022 compared to the previous 12 months.
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This downturn has forced many financial service providers to rethink their strategies and diversify offerings to retain users and stimulate engagement.
Diversification: The New Growth Strategy
To counter declining transaction volumes, several crypto-native platforms are expanding into traditional financial products. FTX, one of the most prominent cryptocurrency exchanges, announced plans to launch stock trading services. The move includes strategic acquisitions—such as purchasing stock settlement firm Embed Financial and stakes in regulated securities exchanges—to build the necessary infrastructure.
Bitpanda, one of Europe’s leading digital asset platforms, already allows users to buy fractional shares and ETFs alongside cryptocurrencies. Other platforms are broadening their reach into forex and commodity options, catering to users seeking higher-risk, diversified portfolios.
Philip Nucci, Risk Manager at KlipC, explains: “Many people interested in investing in crypto also want exposure to stocks. Meanwhile, more risk-tolerant investors are exploring currency and commodity markets.”
This convergence of traditional finance and digital assets reflects a broader trend: the blurring lines between crypto exchanges and retail brokers.
Traditional Brokers Enter the Crypto Arena
It’s not just crypto platforms moving into traditional finance—established brokerage firms are equally eager to tap into the digital asset market.
Robinhood pioneered crypto trading among mainstream U.S. brokers when it launched the feature in 2018. Today, it handles around 9% of all U.S. retail trades. Interactive Brokers has also unveiled plans to expand its crypto offerings significantly.
Meanwhile, financial giants like Fidelity and Charles Schwab are developing dedicated cryptocurrency trading platforms in partnership with major market makers such as Virtu Financial and Citadel Securities. These moves signal a long-term commitment to integrating digital assets into mainstream investment portfolios.
Retail executives argue that early entry into crypto is crucial. “By the time regulators finalize clear rules for digital assets, it might already be too late to capture meaningful market share,” said one industry insider. “The window for growth is now.”
Revenue Models Under Pressure
As trading volumes decline, revenue models built on transaction fees are under strain.
For Charles Schwab, more than 45% of revenue comes from retail investor activity. While this segment has grown amid falling trading income, it remains vulnerable to market sentiment. In contrast, Robinhood’s business is even more dependent on trading—73% of its revenue is transaction-driven—while only 18% comes from long-term investment products.
This imbalance makes platforms like Robinhood particularly sensitive to market downturns. To combat this, they’re investing heavily in user acquisition and account expansion.
For instance, in June, Robinhood launched an aggressive incentive program: users who transfer eligible holdings to its platform can receive up to $800 in rewards. Additionally, those closing accounts elsewhere may earn up to $75 as an exit bonus.
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Such tactics highlight the intensifying battle for customer loyalty in a saturated market.
Core Keywords
- cryptocurrency exchange
- retail broker
- digital assets
- stock trading
- investment diversification
- crypto regulation
- trading volume
- financial convergence
Frequently Asked Questions (FAQ)
Q: Why are crypto exchanges starting to offer stock trading?
A: With retail interest in crypto cooling, exchanges are diversifying into traditional assets like stocks and ETFs to retain users and open new revenue streams. Platforms like Bitpanda and FTX aim to become one-stop investment hubs.
Q: How are traditional brokers responding to the rise of crypto?
A: Major firms like Fidelity and Charles Schwab are building crypto trading platforms, often in collaboration with established market makers. Their goal is to integrate digital assets into mainstream investing and attract younger, tech-savvy clients.
Q: What impact do lower trading volumes have on broker profitability?
A: Since many brokers rely heavily on transaction fees, declining trading activity directly affects revenue. Firms with limited diversified income—like Robinhood—are especially vulnerable and are turning to incentives and new services to maintain growth.
Q: Is now a good time for investors to enter the market?
A: Market conditions vary, but periods of low volatility and reduced speculation can offer strategic entry points for long-term investors. Diversified portfolios that include both stocks and digital assets may help balance risk.
Q: How does regulation affect the competition between brokers and crypto platforms?
A: Regulatory uncertainty slows innovation but also creates first-mover advantages. Companies entering the crypto space early may establish brand trust and infrastructure before rules are finalized, giving them a competitive edge.
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Conclusion
The convergence of traditional finance and digital assets is redefining the investment ecosystem. As retail trading enthusiasm wanes, both crypto exchanges and retail brokers are adapting through diversification, strategic partnerships, and customer incentives.
The future belongs to platforms that can seamlessly integrate stocks, ETFs, cryptocurrencies, and alternative assets into unified, user-friendly experiences. Whether through stock-trading expansions or crypto integration, the race for customer loyalty is accelerating—and innovation is the key to staying ahead.