Commission-free trading platform Robinhood has started facing scrutiny over its heavy reliance on meme-inspired cryptocurrencies, with one analyst suggesting the platform has “high concentration risk in Dogecoin for crypto trading volume and transactions revenue growth.”

The platform embraced the meme-inspired cryptocurrency during the 2021 cryptocurrency market boom and quickly became a major trading platform for it, with its volume growing since then to the point that last year it moved around 8% of DOGE’s supply to a new wallet.

A recent analysis by Beth Kindig, a researcher at IO Fund, revealed the surprisingly high level of Dogecoin concentration on Robinhood. It shows that Dogecoin transactions constitute a staggering 62% of Robinhood’s total crypto transaction volume, which translates to a significant portion of Robinhood’s crypto revenue stemming from Dogecoin trading, given that crypto transactions themselves make up 38% of the platform’s total transaction revenue.

While Robinhood offers a wider range of cryptocurrencies, Dogecoin trading has become a cornerstone of its crypto business. The platform has seen a substantial increase in Dogecoin holdings compared to other assets, with customer balances surging by 122% quarter-over-quarter.

This dwarfs the 68% increase in safeguarded Bitcoin, the world’s leading cryptocurrency by market capitalization, according to the blog post.

The post details that it’s “likely that a majority of March’s $23.6 billion in crypto trading volume can be traced back to Dogecoin, with the same going for April and May.” This, it adds, raises a question of “how durable transaction revenue growth is, assuming crypto trading volumes decline (30%) QoQ in Q2 on fading volume in Dogecoin, and plateau in Q3.”

Adding to the uncertainty is the ongoing regulatory scrutiny surrounding cryptocurrencies as the U.S. Securities and Exchange Commission (SEC) has previously issued a Wells Notice to Robinhood, a precursor to potential legal action. The outcome of this regulatory pressure, particularly regarding which tokens the SEC deems securities and bans from trading, could further impact Robinhood’s crypto offerings.

Robinhood’s substantial holdings of Dogecoin had long been a topic of interest in the crypto community, which initially did not know that the meme-inspired cryptocurrency’s largest wallet belonged to the exchange.

Featured image via Unsplash.