Short-Notice BTC Margin Trading Stoppage On eToro Brings Criticism

As reported by the Wall Street Journal on the 12th of January, 2020, it seems that eToro, a prominent asset exchange, had been put in a pickle. Its Europe-based clients are allegedly complaining that the platform had ceased its margin trading services on Friday, with only a four-hour notice period allowed for the traders.

Four Hours To Undo Big Trades

In particular, users of eToro had been informed that they were mandated to increase the collateral on their margin trading up to 100%. This was done through an email sent on the 8th of January, 2020, at 04:46 PM UTC. In just over four hours, eToro had closed any and all European crypto trader’s contracts if they failed to boost their collaterals on these margins, doing so at precisely 09:00 PM.

When these margin trades were called in, the various crypto holdings of the users were promptly converted into USD. A spokeswoman for eToro, one Amy Butler, gave a public statement about the matter at large. She explained that most of these traders were in the black when these margin positions were called, with Bitcoin managing to reach close to $42,000 in value at that time.

Big Potential Losses For Clients

Jurij Toplak stands as a law professor at Fordham University, and he has a different opinion about the matter, however.

According to Toplak, eToro users will miss out on the profits that can be made through the use of leveraged crypto products. Indeed, the Professor highlighted the future losses for the current traders, thanks to the loss of this service. Indeed, he argued that no user would have a way of getting his money now, should Bitcoin rise to a price of $70,000.

Even the users aiming to short the markets at their top would miss significant profit opportunities through this move within eToro. Many other traders have come to give the platform a piece of their mind in retaliation to this short-notice decision. Some users are moving to new trading platforms as a result of it, blaming eToro for creating large-scale tax issues for them.

Not Making Many Popular Rulings These Days

Something to make a note of, however, is eToro, on the same day it canceled its margin trading, quadrupling the minimum deposit requirements of their platform, albeit just temporarily.

.@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

The official reasoning for this move was” unprecedented” demand from new users for its various services. This runs in tandem with its claim that 200,000 new users had signed up within January’s first week, with the daily crypto volumes of the exchange witnessing an excess of 10x the normal numbers.

Same as the sudden shuttering of its margin trading, this minimum deposit increase was subject to many criticisms, though this one move, in particular, was adjusted in due time.