TL;DR
Goldman Sachs remains cautiously optimistic about brokerages and crypto stocks in the second half of the year, with the core support coming from the fall recovery of traditional trading and anticipated market expansion, while the crypto recovery only provides additional upside potential.
Retail trading cooled significantly in the summer, but after adjusting for account growth, trading volume per unit account is still below the 2021 high, and the current trading cycle has not yet been confirmed to have peaked.
• Prediction markets are becoming a new growth engine for brokerages, with the resumption of sporting events and the approaching US midterm elections potentially driving a rebound in trading volume starting in September.
Crypto trading has been declining for about 10 consecutive months. The recent rebound in market capitalization can only be confirmed as a turning point in the cycle if it continues and is transmitted to trading volume.
Goldman Sachs tops FIGR, HOOD, and IBKR, and sees COIN as a resilient stock during a crypto recovery, highlighting business diversification as a key factor in the valuation differentiation among individual stocks.
Brokerage firms and crypto-related stocks outperformed market expectations following the Q2 earnings season.
According to Goldman Sachs, since the first company in the sector released its second-quarter results on July 21, the average stock price of the companies it covers has risen by 3%, outperforming the S&P 500 by about 1 percentage point. Second-quarter industry earnings were 8% higher than the market consensus, revenue was 2% higher, but expenses were also 5% higher.
Goldman Sachs remains cautiously optimistic about the second half of the year. The core reason for this assessment is not a recovery in crypto trading, but rather the simultaneous structural growth and potential for a fall recovery in both traditional brokerage and prediction markets. The recent rebound in crypto asset market capitalization leaves the sector with additional upside potential.
Valuation also provides a certain margin of safety. Currently, the sector's forward P/E ratio is approximately 24x, and its EV/EBITDA ratio is approximately 14.5x, both placing it at approximately the 30th percentile over the past five years. Goldman Sachs believes that if trading volume improves starting in September, the sector still has room for revaluation.
Summer trading has cooled down, but the cycle may not have peaked yet.
In July and August, U.S. retail stock trading volume declined by approximately 15% and 14% month-over-month, respectively. With second-quarter stock trading volume and margin balances already about 40% and 100% higher than their 2021 peaks, respectively, the market is beginning to worry whether this retail trading cycle has peaked.
Goldman Sachs' assessment is relatively moderate. The report suggests that the record high in absolute trading volume is partly due to the expansion of brokerage platforms. From 2023 to 2025, the number of accounts at major brokerages is projected to grow at an average annual rate of approximately 13%, while client assets are expected to grow at an average annual rate of approximately 40%. Even after adjusting for account growth, trading volume per account in the second quarter of 2026 is still approximately 8% lower than the cyclical peak in 2021.
The margin trading balance shows a similar trend. Although its absolute size has significantly exceeded that of 2021, the ratio of margin trading balance to client assets is still lower than the previous peak. Given the historically strong correlation between margin trading balance and retail stock trading volume, Goldman Sachs believes that this cycle still has room for further expansion, although the growth rate may slow down.
Even after adjusting for account growth, trading volume per unit account remains below the 2021 high.
Seasonality also needs to be taken into account. July and August are typically weaker months for retail transactions throughout the year, and this year's decline was more pronounced than historically expected, although some transactions may have already been priced in for June. Active equity capital markets during the month boosted retail participation and trading volume to record levels.
Goldman Sachs projects that U.S. equity issuance will reach a record $675 billion in 2026, with approximately $252 billion of that occurring in the second quarter. Historical data shows that equity issuance activity typically lags behind retail trading by about a quarter and also benefits securities lending, stock trading, and IPO subscriptions.
Based on seasonal recovery and stock issuance activity, Goldman Sachs expects traditional retail brokerage commissions to grow by 28% year-over-year in the third quarter, with stock and options trading volumes growing by an average of approximately 19%. This forecast still depends on whether trading activity in September can rebound as expected.
Annual seasonality of retail transaction volume
The market is expected to be more resilient in the fall.
Goldman Sachs believes that the forecasting market has both structural growth and cyclical recovery potential, and the autumn trading rebound may be more pronounced than that of traditional brokerage business.
From January 2024 to July 2026, the annualized transaction volume of the market is projected to grow by approximately 1160%. Since August 2025, the number of monthly unique users has increased month-on-month except for April 2026, indicating that the user base is still expanding.
Rapid growth has masked the seasonality of the prediction market. According to data provided by Goldman Sachs, sports, crypto, and political contracts account for the vast majority of trading volume. In July 2026, sports contracts accounted for approximately 79% of industry trading volume, crypto contracts approximately 15%, and political contracts approximately 2%.
Composition of categories in predicting market transaction volume
These three types of contracts are driven by different cycles. Sports trading typically picks up after the resumption of major professional leagues in the United States, and is relatively active from September to January of the following year; political contracts see a surge in volume as elections approach; and crypto event contracts are affected by coin prices and the trading cycle of the crypto market.
Due to a relatively low number of summer sporting events and the fact that trading in the U.S. midterm elections had not yet peaked, trading volume in the forecasting market declined by approximately 15% month-over-month in August. Goldman Sachs attributed this primarily to the seasonality of underlying event contracts, rather than the end of structural growth in the industry.
Starting in September, US sports events resume, and the midterm elections are approaching. If activity in the crypto market improves simultaneously, the three main types of contracts could create a synergistic effect. However, as an asset class that has been developing for less than three years, prediction markets still have limited historical data, and the stability of their seasonal patterns needs further observation.
Online sports betting revenue is relatively active from September to January of the following year.
The rebound in crypto market capitalization has not yet translated into increased trading volume.
Compared to traditional trading and prediction markets, Goldman Sachs is more cautious in its assessment of crypto trading.
Crypto trading volume in the industry fell 30% month-over-month in July and has further declined by 21% so far in August. This downturn in trading has lasted for about 10 months, higher than the median of about 4 months from peak to trough in the past five crypto cycles.
According to the report, in the past six crypto cycles, the total market capitalization and trading volume have decreased by an average of approximately 51% and 66%, respectively; in this cycle, as of the time of the report's publication, they have decreased by approximately 40% and 75%, respectively. This means that the contraction in crypto trading activity has exceeded the historical average, but the magnitude and duration of the decline alone are insufficient to confirm that the cycle has bottomed out.
Average decline in crypto market capitalization and trading volume over various cycles
Positive signals came from asset prices. In the week before the research report was released, the total market capitalization of crypto assets rose by approximately 21%. Goldman Sachs believes that if the total market capitalization can remain at current levels for an extended period, trading volume may rebound as risk appetite improves.
The key here is "sustainability." Crypto asset market capitalization also briefly rose by about 5% in April and May of this year, but subsequently fell back, and trading volume did not see a sustained rebound. Therefore, the recent increase in market capitalization only increases the likelihood of a trading recovery, and is not sufficient evidence of a trend reversal.
The impact on brokerages and crypto companies is not entirely the same. Goldman Sachs statistics show that since 2026, the median correlation between the stock prices of crypto-related companies and the total market capitalization of crypto companies has been approximately 36%. Platforms with more diversified businesses, such as Robinhood and Figure, have historically had a relatively lower correlation with crypto prices; Coinbase's operational resilience is more direct.
The current downtrend in crypto trading has lasted longer than the historical median.
Regulatory reforms continue to advance, but legislation is still needed for institutions to enter the market.
Regulation is another variable that could determine whether the crypto market can shift from a cyclical rebound to a structural expansion.
Goldman Sachs believes the likelihood of Congress passing the CLARITY Act, a bill establishing the crypto market structure, during this term is decreasing. The Senate's failure to vote before the August recess, coupled with the midterm elections and subsequent congressional recesses, has further compressed the legislative timeline.
Meanwhile, U.S. regulators are still pushing forward with some reforms. The SEC recently proposed an "innovation exemption" for digital assets, planning to provide temporary exemptions from registration and qualification requirements for eligible digital asset issuers and securities. The OCC continues to approve trust banking licenses for digital asset companies, enabling them to engage in businesses such as fund transfers and asset custody.
These measures may drive the expansion of applications such as tokenization, custody, and decentralized finance, but Goldman Sachs emphasizes that the sustainability of administrative regulation is weaker than that of congressional legislation. For institutions to adopt digital assets on a large scale, the market still needs a more stable and clear legal framework.
A Goldman Sachs survey of institutional investors in 2025 revealed that 35% of surveyed managers considered the lack of regulatory clarity as the biggest obstacle to entering the crypto market, while 32% listed regulatory clarity as the primary catalyst for institutional adoption. Therefore, short-term adjustments by regulators can improve the market environment, but the progress of congressional legislation is the core indicator determining whether institutional funds can systematically enter the market.
Major barriers to institutional entry into the crypto market
The platform is looking for revenue beyond crypto trading.
Amid the sluggish crypto trading market, companies are primarily seeking to stabilize their profits through two methods: reducing fees and developing new businesses that are less correlated with spot trading volume.
According to Goldman Sachs estimates, by 2026, five brokerage firms and crypto companies had implemented cost-adjustment measures, cutting annual expenses by an average of approximately 4% to 5%, which equates to providing approximately 5.8 percentage points of support to adjusted operating profit margins. While cost controls did not fully offset the revenue decline, they mitigated the impact of sluggish trading on profitability.
In terms of individual stocks, Goldman Sachs' top picks are FIGR, HOOD, and IBKR, and it views COIN as an upside pick during the crypto market recovery.
Robinhood's core logic is account asset growth and business diversification. Goldman Sachs projects that HOOD's average revenue per user will grow at a CAGR of approximately 16% from 2025 to 2028, with customer assets and revenue growing by approximately 29% and 21%, respectively. Growth drivers include traditional brokerage, prediction markets, digital banking, credit cards, and wealth management.
Of these, prediction markets are projected to contribute approximately 13% of HOOD's revenue in 2026. Its newly established Rothera prediction market exchange gained about 3 percentage points of market share less than two months after its launch, corresponding to an annualized revenue of approximately $150 million, according to the report. While the prediction market is growing rapidly, the platform's short history means it remains to be seen whether it can maintain its current market share.
HOOD revenue is diversifying into prediction markets, subscriptions, and other businesses.
Figure's primary growth driver is the Home Equity Line of Credit (HELOC) market. Since the third quarter, its consumer loan transaction volume continues to push towards year-over-year growth exceeding 100%. Goldman Sachs believes the company's overall fee rate decline stems mainly from changes in product structure and channels, rather than simply price reductions: large, first-priority HELOC loans have lower fees, and the less capital-intensive FIGR Connect business also has lower fees but higher profit margins.
Interactive Brokers' advantage stems from its global reach. Since 2026, over 75% of its monthly active users and approximately 85% of its app downloads have come from markets outside the US. Goldman Sachs projects that IBKR's account numbers will grow by 33%, 24%, and 21% respectively from 2026 to 2028, with revenue growing at an average annual rate of 15% from 2025 to 2028. This global account growth and a pre-tax profit margin exceeding 75% make it relatively less sensitive to cryptocurrency price fluctuations.
Coinbase offers more direct resilience to the crypto market. Since Q1 2024, the company's market share in crypto derivatives has increased by approximately 8 percentage points; its subscription and service businesses, including stablecoins, custody, staking, and Prime Brokerage, have contributed approximately 40% of its revenue in 2025. These revenues have a relatively low correlation with crypto trading volume.
COIN is also expanding into prediction markets, stock trading, banking, and wealth management. Currently, these products contribute limited revenue, so Goldman Sachs primarily views them as potential upside rather than realized profit sources.
COIN revenue is migrating to subscription and service businesses.
What should we really look at next?
Goldman Sachs' optimistic outlook on brokerages and crypto stocks is based on several conditions that still need to be verified.
First, whether retail stock and options trading volumes can recover from the summer slump in September will determine whether the seasonal recovery in traditional brokerage business is valid. Second, whether sporting events and the midterm elections can drive up trading volume in prediction markets will test whether prediction markets are a sustainable new business or a temporary high-growth category.
The crypto market requires both price and trading volume to be met simultaneously. Maintaining a high total market capitalization is only the first step; whether spot and derivatives trading volumes can subsequently rebound will truly improve the trading revenue of related companies. From a regulatory perspective, continued rule easing by executive agencies can support short-term innovation, but whether Congress can pass a stable market structure bill will still determine the upper limit of institutional adoption.
Current valuations in the sector have declined, but the quality of growth varies within the industry. FIGR, HOOD, and IBKR rely on lending, prediction markets, and global account growth to provide relatively independent fundamentals; COIN, on the other hand, retains greater resilience during the crypto cycle.
Therefore, this report is not betting that the crypto bull market has restarted. Goldman Sachs is more focused on the fact that brokerages and crypto platforms are increasing their revenue streams, which are not reliant on a single trading cycle. The next step is to see if these new businesses can continue to support growth after the autumn trading recovery.