The trading platform eToro has interrupted leveraged crypto trading all of a sudden. It notified its users with an email inviting them to put 100% margin on leveraged positions by Friday, January 8th at 21:00 GMT, for leveraged positions and CFD contracts. Otherwise, the position would have been closed automatically regardless of whether the position was a gain or a loss. The ‘lost’ funds would be transferred to the user’s account.
This would only apply to European users.
In practice, the only way to keep the position open is to set the margin at 100%.
The decision was motivated by the fact that the market is very volatile and ‘dangerous’.
“Crypto is a highly volatile asset class and trading crypto with leverage can be highly dangerous in the current volatile market conditions. Due to the high volatility in crypto markets, we may have to make further changes to our crypto offering a very short notice”.
The news has infuriated traders. According to Coindesk, Slovenian lawyer Slavko Vesenjak claims eToro has violated the agreement with its customers:
“A four-hour notice before closing all leveraged crypto positions made people wake up in their different time zones seeing their positions closed”.
According to eToro however, the decision did not impact the majority of customers.
Amy Butler, head of PR at eToro, assured that the platform is still working to address the complaints that have come in.
Why did eToro discontinue leveraged crypto trading?
The crypto market is indeed in turmoil. Bitcoin has hit a record high of over $40,000 in the past few days, but as of last night it is in a steep decline: it has fallen as low as $33,000 and is currently trading at $35,000. This is still a daily drop of around 14%.
As always, Bitcoin is dragging the rest of the market which today is seeing mostly negative signals, with double-digit declines of up to 20% for some of the most popular cryptocurrencies such as Ethereum (-17%), XRP (-17%), Litecoin (-20%), Bitcoin Cash (-21%).
With these numbers, it is impossible to deny the volatility that makes the market very dangerous. The remaining issue is that eToro made the decision without giving its traders time to act.