eToro was founded in 2007 as a forex trading platform. The company’s vision was to build a product that was accessible to millions of users, something which was hard to come by at the time. Since then, eToro has pioneered new technology in the online trading space, introducing a social trading platform in 2011 which allowed traders to follow and copy other successful traders. This was all thanks to the company’s technology which shared trading data among their users in order to allow investors to take an edge over the competition.
In 2013, eToro became one of the first mainstream trading platforms to recognize the legitimacy of Bitcoin as an alternative asset with real-world demand, launching Bitcoin trading and going against the highly skeptical sentiment at the time. 4 years later the success of their Bitcoin trading platform led to the introduction of several more cryptocurrencies including Ethereum, XRP and Litecoin. eToro continues to expand its cryptocurrency offering, adding new tokens and assets with surprising regularity.
Having had over a decade’s-long history as a traditional trading platform and with over 8 million users worldwide, eToro now has a lot to offer to the cryptocurrency market. How does the platform stack up against the competition, and why has the CopyTrader product been so positively received? Continue reading this review to find out more about eToro’s social trading product, contracts for difference and the positives and negatives of using eToro over other cryptocurrency trading platforms.
eToro is licensed and regulated by a number of governing bodies, including the UK’s Financial Conduct Authority (FCA).
Buying Cryptocurrency on eToro
eToro is not like most other cryptocurrency platforms we list on EthereumPrice.org. The platform buys and sells cryptocurrency on its traders’ behalf meaning that the trader never takes ownership of the “physical” cryptocurrency asset.
This approach may seem odd to new traders, however it has a number of benefits – particularly in the cryptocurrency market.
- Traders do not need to worry about securing cryptocurrency assets.
In the past 10 years there have been countless exchange hacks which have collectively led to the left over billions of dollars. One such incident at the start of 2018 saw over $500m stolen from the Japanese exchange Coincheck. These hacks carry a very real risk to users who store their cryptocurrency on exchanges. Of course, traders can move their cryptocurrency off of the exchanges, however this comes with its own learning curve and risk of theft that new investors may be uncomfortable with.
- High liquidity
Cryptocurrency markets often suffer from low liquidity (low trade volume) which can be particularly problematic for larger investors, or investors who simply want quick access to the market. By purchasing cryptocurrencies in this way, eToro is able to provide instant trade execution to their users, something which cannot be guaranteed at a cryptocurrency exchange. This is particularly useful for traders in the United Kingdom and other countries where their local currency has very few and low liquid markets (ETH/GBP for example).
- Shorting the market
When using a platform like eToro, it is also possible to short the market to profit when a cryptoasset is falling in price. Of course, it is possible to short sell a cryptocurrency on some exchanges, however the need to actually borrow the underlying asset to then sell it makes the process much more complicated. Trading like this makes shorting the market an extremely simple process and provides the same outcome as the real thing.
eToro allows traders to access and profit from the market movements of a number of different cryptocurrencies which can be found below.
eToro does not charge a deposit fee, but does charge a conversion fee on all deposits and withdrawals. More details about these fees can be found in the FAQ at the bottom of this review.
Banking at eToro
eToro’s proprietary CopyTrader product is possibly the broker’s single most defining feature. The company pioneered social trading in the early 2010s, a concept which has become somewhat of a phenomenon today and has since given eToro a major advantage over its competitors in this space. Copy trading allows any user on the eToro platform to match the trades of any other participating trader, some of whom have several thousand traders copying them at any given time. Copying another trader is extremely simple thanks to the platform’s use of a social network style UI which features a detailed history of each trader’s performance, ROI and risk profile. Traders can choose to copy an individual based on country, market and percentage ROI. An advanced filtering feature allows users select traders based on risk score, daily drawdown and active weeks to name just a few.
Past performance is not an indication of future results.
Copy traders will only profit if the person they are copying is able to earn a positive ROI, however with the sheer volume of data available, deciding on a suitable CopyTrade can become an invaluable piece of any portfolio. As can be seen in the step-by-step guide to eToro further below, the process of opening a trade – whether as a simply buy order or a CopyTrade – is extremely simple. Once opened, the trader can simply outsource the decision making, or continue trading other products as part of a diversified portfolio.
Step by Step eToro Guide
1. Register a free account at eToro
eToro is not available to traders in every country; first it is important to check if the platform accepts new registrations from your region – you can scroll to the banner at the top of this page to find out. The next step is to visit the eToro.com website and create a free account.
eToro’s virtual portfolio
On completion of this first step, your account will be made accessible immediately. While you’ll not be able to deposit funds until you have completed further verification checks, you will be able to access your virtual account which will give you access to the same cryptocurrency markets and CopyTraders using “play money”.
2. Complete your profile to access real trading
Users looking to trade with real money immediately will need to complete their profile.
The profile completion process takes no more than a few minutes and requires the user to enter details regarding:
- Name and address
- Confirmation that they were not born in the US and are not a US citizen
- Trading experience
- Trading knowledge and assessment
- Attitude to risk
The process is a means to determine the level of risk that a trader may be exposing themselves to. This is an important step in ensuring that eToro complies with regulation and protects their customers from parting with their cash without understanding the full risks. The process is simple and the questions are very straightforward, failure to pass through this step would justify withholding a user’s ability to open an account.
Once a trader’s profile has been completed it is possible to deposit up to 2,000 EUR. This limit can be removed by providing the necessary documents (proof of address and ID).
3. Making a trade
With an account now funded, trades can be opened on the eToro platform. For simplicity, this guide will look at trading a specific cryptoasset as opposed to a CopyPortfolio or using the Copy People functionality. The premise of eToro’s CopyTrader is elaborated on further above in this guide, and will be a useful start for anyone interested in the benefits of social trading.
Using the Trade Markets page, a trader can filter all markets by “Crypto” by clicking the appropriate tab at the top of the page. The next page will show a list of all the available cryptocurrencies at eToro. For the purposes of this guide we will look only at the trading of Ethereum, however the same principles apply to all other crypto markets on eToro.
Buying and Selling Ethereum on eToro
Navigate to the Ethereum card from this page. This card provides a range of information:
- The tick mark at the top right of this card allows you to easily add/remove the cryptocurrency from your Watchlist.
- The percent change and graph are set to 1D (24 hours) and clicking the graph will take you through to a more detailed charting package.
- The green bar at the very bottom of the card indicates the percentage of trades which are Buying the asset. In this case, the number of users Buying ETH is nearly 100%. The bar will show as red if the majority are selling.
- Buy and sell prices show how much the cryptoasset can be bought and sold for. The difference between the two is called the “spread”; an important figure which is explained in more detail later in this review.
Clicking the buy or sell buttons will bring up a popup to trade Ethereum and a number of custom settings can be edited on this screen:
Amount and units
From this section, the trader can set the amount of Ether they wish to buy, either denoted as USD or as the asset itself (Ether in this case). For example, a trader can choose to buy $5,000 of Ethereum or 8.14 Ether units. The trade dialogue will also show the percentage of equity that this trade will require, in this example it is 5%.
This is a critical setting in the trade. How much are you willing to lose before automatically closing the trade? Of course, a trade can be closed manually, however the best time to make a decision about maximum loss before closing the trade is now. If this is not set, then if and when the price falls, panic and fear could well lead to irrational and potentially detrimental outcome. If the trader is willing to lose everything then the stop loss can simply be set to the full investment amount.
This is the reverse of the stop loss. At which point would the trader be comfortable automatically taking profit? Again, this is useful as a means to remove emotion from the decision making process and setting expectations early on. Both stop losses and take profit amounts can also be changed once the trade is open.
For slightly more advanced traders, the option to use an “Order” rather than a “Trade” is available at the top right of this screen. Creating an Order allows a trader to buy or sell the crypto asset once a predetermined rate is set. For example, if the current USD rate of Ethereum is $620, a trader could set an Order to buy at $625 or sell at $615, rather than having to purchase the asset at the current market rate.
The spread is the difference between the buy and the sell prices on eToro. This difference is crucial because the larger the spread is, the more the investor has to “pay” when opening the trade. For example, if a user was to buy Ethereum at a price of $620 and a sell price of $610, they would immediately face a cost of $10 per unit when opening the trade. Explained another way, if the trader bought 10 units of Ether at these same prices, their portfolio would need to increase by $100 to break even.
The spread exists across all exchanges and brokers (in cryptocurrency markets and traditional ones), however some brokers will have smaller spreads than others. Details on eToro’s cryptocurrency spreads can be found here.
Where Does eToro Fall Flat?
eToro is arguably one of the best places for investors to quickly access cryptocurrency markets, particularly investors who would prefer not to concern themselves with exchange hacks and private key security. eToro excels in many areas, however to provide a balanced review of the eToro platform we are compelled to discuss some of its weaknesses too:
When trading on eToro and other brokerage accounts, spreads are often calculated as “pips” (the smallest unit of account for the market). A spread may be a few pips or more, but the rate is flat. In the case of eToro’s cryptocurrency markets, the spread is calculated as a percentage which can be as high as 5%. This is not surprising as cryptocurrency markets are volatile and high risk, requiring a more aggressive spread for eToro to retain commercial viability.
Most of eToro’s cryptocurrency Buy markets do not charge an overnight fee (the cost of leaving a trade open). The Sell markets on the other hand all carry an overnight fee which means holding a trade open for the long term can prove very expensive. For this reason, eToro is geared towards day traders who are looking to make a high quantity of trades as opposed to a few long-term ones. Not all crypto markets carry an overnight fee, but Ethereum and Bitcoin do. For investors looking to buy and hold Ethereum or Bitcoin for the long-term, it would be wise to consider alternative options.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.
eToro Restricted CountrieseToro is not available to users from the following countries: Canada, Japan
Frequently Asked Questions
Due to eToro’s approach to cryptocurrency trading (with the user not physically buying/selling the underlying assets), short selling cryptocurrencies on their platform is very simple. A trader can short any asset simply by clicking “sell”, should the price of the cryptoasset decrease the trader can then close their position to make a profit. eToro has made short selling cryptoassets highly accessible to all traders, however given the nature of cryptocurrency price movements, shorting the market can be highly risky.
All of eToro’s markets are set in USD and for this reason all deposits are converted to USD. eToro charge a small fixed fee (in pips) on this conversion as outlined here and fees vary depending on the currency deposited. Withdrawals also have these same conversion fees applied along with a flat $25 fee. For this reason, eToro appeals more to investors who are considering deposits in excess of $1,000.
eToro established itself as a forex broker before moving into commodities and equities. Users can trade across the cryptocurrency markets mentioned on this page as well as markets such as gold, oil, GBP/USD, Apple (AAPL) and Amazon (AMZN) among many others. A full list of markets can be found here.
Aside from a fully functioning web application, eToro also offer an iOS and Android application to help users more easily open, close and watch their trades. Traders can also use these applications to interact with the CopyTrader product whilst also making markets easily accessible.
eToro was the pioneer of social trading or “copy trading” as it has become known. Thanks to eToro’s platform technology, traders can publicise their positions other traders to follow. Going further, CopyPortfolios (a portfolio of assets) can also be followed and profited from with some of the platform’s best traders and funds readily available in a leaderboard. A CopyPortfolio may be comprised of traders, markets, or the hand-picking of specialist partners.
As with any good cryptocurrency broker, a package of professional charting tools can be found on the platform. eToro’s “Procharts” package provides 5 different chart types including candlestick and line charts as well as tools to draw, annotate and measure graphs across all markets. Other settings that can be manipulated include timezones, scales (log or linear) and themes to provide much greater levels of customization.
Outside of a comprehensive charting package, eToro also provides a range of other trading tools to aid a trader’s strategy. These include:
- Market-specific news feeds
- Market statistics
- Portfolio management
- Detailed trade history
eToro has invested considerably in their software and this is demonstrated by the tools and trading experience of the platform.