Online brokerage platform eToro abruptly halted cryptocurrency margin trading just as Bitcoin exceeded its ATH as reported by Wall Street Journal. As per an email sent by the company on Jan. 8, customers of the platform were asked to increase their margin collateral to 100%. Users who were unable to do so had their contracts closed who didn’t generate their margin collateral to 100%.
eToro Criticized For Abrupt Closure of Margin Trading
European traders of eToro were given just four hours notice period that the platform’s margin trading services would be halted. The notification came just as Bitcoin hit its all-time high of $41,962 last week, after tripling more than in 2020.
In an announcement notification on Jan. 8, customers of eToro were notified:
“If you do not increase the margin to 100%, then the position will be closed at 21:00 GMT today.”
With margin trading, the value of the cryptocurrency increases as investors can increase their leverage. Clients with the available balance could keep the positions open by adding funds. Meanwhile, those that didn’t have the available balances had the option to close other positions to clear the funds.
Amy Butler, global head of PR for eToro, stated:
“We understand that there are several dozen frustrated clients and we are working hard to resolve their frustrations.”
According to Butler, the decision to halt the margin was only temporary to increase the platform’s deposit minimums. As per the spokesperson, the decision was taken from an internal risk management perspective and was not related to any potential IPO plans. Last week, eToro announced plans on a $5 billion public listing.
Customers Disappointed with eToro’s Short Notice
On the same day of the notice, eToro also announced temporarily increasing its minimum deposit requirements from $200 to $1000 citing unprecedented demand for its services from new users.
Crypto traders were shocked by the platform’s sudden decision on the short notice and the potential ramifications it can cause, saying:
Thanks for closing all crypto leverage positions on Sat Morning with one email notification that came thru at 2:30am on Sat morning. This creates a big tax issue, which could have been manages with a little notice.
Very unprofessional, I will now find a new trading platform
— PhillGallagher (@PhillGallagher) January 9, 2021
The online brokerage platform has claimed to have gained 200,000 new account sign-ups in the first week of January. That itself drove up the platform’s daily volumes exceeding last year’s average volume by more than 10 times.