Robinhood (NASDAQ:HOOD) stock is rallying for the second straight day after the firm announced that it will pay $200 million of cash to acquire cryptocurrency exchange Bitstamp. Experts are viewing the transaction as a big bet by Robinhood on the crypto sector.

Founded in 2013, Robinhood offers a trading app that has attracted many retail investors. Lately, though, the firm has been seeking to offer more types of financial services. Meanwhile, Bitstamp already provides a number of additional services associated with cryptos, including staking and lending. According to CNBC, Bitstamp’s core spot exchange is most popular in Europe and Asia, and Robinhood believes the deal will enable it to accelerate the pace of its moves into new global markets.

Expected to close in the first half of 2025, the transaction will result in Robinhood competing more intensively with major crypto exchanges.

Robinhood CEO Vlad Tenev believes that crypto will “fundamentally reorganize the financial system.”

What Investors Should Be Watching

Last month, Robinhood received a Wells notice related to its crypto business from the U.S. Securities and Exchange Commission (SEC). A Wells notice indicates that regulators intend to charge a given company with violations of a number of laws or rules. With that in mind, investors should consider the possibility that the acquisition of Bitstamp will cause regulators to become even less pleased with Robinhood. That’s because the deal will have the firm become even more involved with the crypto sector.

Importantly, investors should also consider that the valuation of HOOD stock is now quite high. Specifically, shares now have a large price-to-sales (P/S) ratio of 9.4 times.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.