A Wall Street Journal article released on January 12 says European eToro customers were given just four hours notice that the platform’s margin trading services would be suspended on Friday.
EToro users were told that they had to raise their collateral margin to 100% by e-mail at 4:46 UTC on 8 January. The platform closed the contracts of every European crypto dealer who did not raise its collateral margin to 100% by 9:00 PM.
When a business calls in the margin transactions, the user’s crypt was immediately converted to US dollars.
Amy Butler, an eToro spokeswoman, said that “most traders were in black” when margin positions were called, with Bitcoin’s price nearing $42,000 at the time.
However, Jurij Toplak, professor of law at Fordham University, cautioned that potential revenues will be lost to eToro consumers pursuing leveraged crypto goods, stating:
“There’s a lot of loss here for the users. It’s future losses: if Bitcoin rises to $70,000 now the user has no way of getting this money.”
EToro users trying to shorten markets at their top will also have lost a major business incentive.
Other traders have outlined the possible implications of eToro’s short notice announcement. Twitter user Phil Gallagher stated to have received an email update on margin trading at about 2:30 a.m. local time, stating:
“This creates a big tax issue, which could have been managed with a little notice. Very unprofessional. I will now find a new trading platform.”
The platform has briefly quadrupled its minimum deposit thresholds on the same day, noting “unprecedented demand” for its services from new customers. EToro recently reported to have earned 200,000 new account registrations in the first week of January, pushing daily crypto volumes more than 10 times the 2020 average.
.@eToro has seen an unprecedented demand for our services from new users. To manage demand & ensure our existing community of 17M registered users can continue to access our services uninterrupted, we have temporarily increased the minimum deposit amount for new users to $1,000.
— eToroService (@eToroService) January 8, 2021
Many Crypto Twitter users have been sceptical of eToro’s modest deposit hike, noting that the move would mainly affect novice traders.
“I’m not sure it’s a good idea,” said Twitter user evertmulder85. Adding: “It’s a forum for newcomers. The appeal is beginning to be small. It’s not a mere $1K.”
It is speculated that EToro is planning for the initial public offering in the second quarter of this year, after allegedly “doubling its revenue to $500 million” and winning five million new users last year.