Cryptocurrency is a hot commodity right now, but many people just don’t know how to go about trading it.
Many popular brokerages do not offer cryptocurrency trades so it can be hard to know where you need to go and what you need to do. Trading crypto is inherently volatile and you have a high chance of losing your money.
eToro is a relatively new trading platform that specializes in social trading and copy trading with cryptocurrency variants.
It provides a place where you can trade high-risk cryptocurrency in a structured and easy-to-understand manner.
So today we are going to take a look at eToro and answer some questions.
Can this trading platform help you make money with cryptocurrencies? Can it help you take the high risk of trading these speculative assets and is this a provider you should consider?
We will answer these and many more in our eToro review.
(P.S. Check out our comparison of Etoro vs Trading 212 here).
eToro is an Israel-based brokerage firm that is a cryptocurrency trading service.
eToro UK Ltd is regulated by the Financial Conduct Authority and serves clients in the UK, US, Australia, Europe, and several countries around the world. It originally got its start as a forex broker but has retooled its interface and workings to cater directly to cryptocurrency trades.
Fair warning though: Cryptocurrency is notorious for being very high risk.
There is a high risk of losing your money but also the potential for high gains. There is a high risk that your retail investor accounts lose money but a trading account with cryptocurrency can make a lot of money.
In fact, about 75% of retail investor accounts lose money when trading CFDs with this provider.
eToro is probably best for investors who already have a decent understanding of forex and cryptocurrency markets. Outside of the US, customers can also trade stocks and commodities, among other assets, for contracts and differences.
CFD accounts like this are notorious for the risk of accounts losing money but also have great potential for gains if played correctly.
eToro allows investors to perform copy-trading by following risk-control rules. Retail investor accounts can then mimic these trades automatically and in real-time.
They offer no-commission trades for forex trading but they do include fees in its spread which can depend on specific market conditions.
However, eToro is currently not authorized for other kinds of trading in the US aside from cryptocurrency trades. They plan to expand their asset repertoire by the end of this year. If you’re interested in investing in cryptocurrency, you should also check out our Coinbase UK Review.
How Does eToro Work?
Before you commit to the platform, you can create a virtual account which is essentially a practice account so you can get a feel for the platform.
It is a web platform with a focus on mobile trading. The mobile application has a clean interface that you can browse for trades and opportunities. Trading is as simple as making a few clicks on your screen and all relevant information is displayed in an easy-to-read manner.
On the left-hand side of the trading window are your account details, including your real portfolio and virtual portfolio. You can click on assets within each window to start making trades.
You can also select the “Markets” option to look at the full range of assets available. You can further filter these results by a particular asset class such as stock trading, currencies, commodities, etc. You can also filter results based on specific industries and sectors.
Once you are done selecting your assets, a screen containing historical data about recent conversions will pop up. This informational window is great to get a handle on how your selected assets have fared over time.
Then, you can click on the “Trade” button at the bottom of the screen to complete your transactions.
Like most online brokers, eToro has a rather in-depth application process. You start by providing relevant financial information such as your name and identification information.
You also have to provide a copy of some official proof of identity. Once you complete the application and send it in, it takes about 1-4 days to get approved. Then you can add your payment methods, fund your account, and start investing.
One of the more unique features of eToro is the copy trade function.
With the copy trade function, you basically invest in other traders who you believe will make a profit. You can search for traders under the “People” menu option and filter them by location, assets traded, or overall activity.
So say for example you want to find a UK-based forex trader that has averaged at least 7% in the past 4 months, you can put in those filters and eToro will create a list of traders that fit that description.
You can then click the “Copy” button which lets you enter the amount your wish to trade and mimics that particular trader’s behavior.
Traders who get copied get an additional commission from the platform, so there is an incentive to be an active trader who others want to copy.
Knowing which players are winners is extremely important as that can help you make the most money on the trading platform.
Withdrawal and Deposit Options
One of eToro’s benefits is that they offer a very wide range of deposit and withdrawal options.
Currently, supported methods include credit cards and debit cards, eWallets such as PayPal, Skrill, UnionPay, and Neteller, and traditional deposit options such as a bank wire transfer.
Withdrawals and deposits normally take 1-3 business days to go through, which is a pretty typical timeframe for an online broker. There is a minimum deposit of £200 and a minimum withdrawal amount of £50.
eToro also charges a withdrawal fee which is equal to a certain percentage of the withdrawn funds.
eToro also has some restrictions on how withdrawals work. You have to withdraw your money in the same method as you made your initial deposit. This restriction is in place to prevent money laundering.
They may also request certain ID verification too for the same reasons. Accepted forms of ID include a copy of your passport, a recent utility bill with your name and address, or a paying credit card.
The biggest problem with withdrawal options is the fee. Withdrawal fees are fairly expensive compared to a lot of other brokers, and many brokers do not charge withdrawal fees at all. It is the price to pay for eToro’s unique focus on forex and cryptocurrencies.
What Kinds of Assets Can I Trade With eToro?
If you are in the US, then you can currently only trade with cryptocurrencies. Customers from other countries have a wider range of options, depending on the specific nation and regulations.
UK-based customers have the widest amount of trading options.
You can invest in stocks, ETFs, commodities, indices, and cryptocurrencies. eToro offers most popular cryptos, including Bitcoin, Ethereum, Ripple, Litecoin, and more.
As far as indices, eToro currently offers 10 top indices. However, they only offer 3 commodity options now but they plan to expand this list in the future.
Stocks are the asset class with the most diversity. eToro offers shares from over 250 global companies including some major players such as Apple, Microsoft, HSBC, and more.
How Does eToro CopyPortfolios Work?
In addition to their copy trading function. eToro recently rolled out Copy Portfolios, a new way to invest online. Copy portfolios can be split into two types: Market copy Portfolios and Top Trader Portfolios.
Both kinds of portfolios manage funds using a sophisticated algorithm, so these features share a lot in common with modern roboadvisors.
With Market Copy Portfolios, investors can select predetermined groups of assets to follow a predetermined trading strategy. Each portfolio is assigned a percentage of your total fund capital and the allocations are updated accordingly as market conditions change.
For example, eToro offers a “BigBanks” fund that follows US-based ETFS from large banking institutions, and a wide range of other portfolios based on distinct sectors or industries.
These kinds of portfolios are a great way to diversify your portfolio without having to micromanage your assets. eToro is constantly updating what kind of portfolios they have so make sure to check back often to see if anything has changed.
Similarly, the Top Trader Copt Portfolio follows a range of selected traders without the need to check back and constantly manage your funds. You can also have a copy portfolio built specifically out of cryptocurrencies.
This function makes it much easier to get into investing in cryptocurrencies by providing a straightforward way to structure your portfolio.
eToro Crypto Wallets
Adding to their list of cryptocurrency focus services, eToro also recently added cryptocurrency wallets. These wallets allow users to buy and sell cryptos, convert them, and use them to pay for goods and services, like a regular eWallet such as PayPal or Google/Apple Pay.
Currently, the wallet is still in the rollout phase but the plan to expand the list of accepted cryptocurrencies and features soon. In order to use a crypto wallet, you have to download a separate app from the app store and connect it to your eToro account.
If you have a Platinum account, then you already get access to some of these features from the get-go.
One of the best features of crypto wallets is that you can see a full ledger of your blockchain transactions without having to give out your private key. The entire point of offering crypto wallets is to make using cryptocurrency more accessible to the average person.
One other feature of eToro is its library of educational resources. eToro has a huge database of articles, videos, and other resources focused on news and trading tips and tricks. They also have a special section devoted specifically to daily analysis of the current state of the market.
Beginners will find the training videos and educational articles extremely useful. The best part about it is that you do not even need an eToro account to access the articles or updates.
Anyone can use them for free. However, you will need to make at least a demo account to use the Trading School materials, where you can register for short courses on how to trade crypto, stocks, and forex currencies.
What Kind of Fees Does eToro Have?
eToro is a brokerage service, not a forex exchange, so its fee structure is different from exchanges. Compared to other crypto platforms, eToro’s fee structure is a bit more nuanced and complex.
eToro does not charge a commission on regular trades, but you will still have to pay what is called a “spread fee” when trading cryptos.
Essentially, a spread fee requires you to pay a percentage of the sale price, which is determined by the difference between the buy and sell price of the asset. Crypto spread prices vary over time so these fees can also vary over time.
So for example, say you sold 1 Bitcoin at £5,000 and the current spread value is 0.5%. That means you would have to pay 0.5% of that £5,000, which comes out to around £25. This is the basic fee structure for buying and selling cryptos.
Things get a bit more complicated if you want to use cryptos for leverage. eToro will charge “overnight fees” for cryptos held in leverage, which are sometimes called “rollover” fees.
Since you are borrowing money to hold a leveraged position, the overnight fees essentially amount to an interest charge.
Like spread values, overnight fees vary depending on the current value of the cryptocurrency. As of the time of writing, the current overnight value for Ethereum is 0.11%. These overnight fees are noticeably higher than many other crypto exchanges so you can be losing money rapidly due to leverage.
Lastly, eToro also charges withdrawal fees and inactivity fees. Inactivity fees amount to £10 per month and start when user accounts have not made any trades within the past 4 months.
Again, just to clarify, most of these fees change over time depending on specific market conditions. So the quoted figures in this article could change in a few days.
How Secure Is eToro?
eToro takes the security and privacy of its customers very seriously. They have several measures in place to keep your info and money safe.
To that end, they make heavy use of firewalls and encryption to secure your data. All customers must have a unique username and password, and you can activate 2-factor authentication to make your account more secure.
As far as regulations go, eToro is regulated and approved by the Financial Conduct Authority FCA so they operate within the UK’s required banking regulations. However, there are a few black marks on their record.
They were fined by the CySEC (EU) a few years ago for undisclosed reasons and the platform has been banned in Quebec. However, there is no record of major scandals.
One of the main reasons for security is the way that eToro handles cryptos. In general, eToro does not directly hold crypto assets so they do not need to use harsh security measures for crypto trades. eToro does offer some direct trading, but it is not clear what kind of security measures they use to protect your assets.
For example, if you use your crypto wallet, eToro holds your private security key, without which it is virtually impossible to access your crypto funds.
eToro holds your funds separate from your bank account, so even if someone got into your account they would not have access to your bank account. Like we said, eToro is regulated by the FCA in England and other relevant financial regulatory agencies in the respective countries it operates in.
Further, your funds are protected by the financial services compensation scheme and it is regulated by the Securities and Investments Commission
eToro Pros & Cons
- Excellent platform for trading cryptocurrencies. eToro’s main focus is making cryptocurrency trading simple and accessible and they succeed on that end. Trading cryptos is as easy as trading stocks and there is a wide range of supported currencies.
- Interesting trading options. eToro has some very unique trading options, primarily the copy trading features, retail investor accounts, and social trading features. They also allow leverage trading with cryptocurrencies which many other crypto brokers do not allow.
- Low CFD fees. eToro offers very low CFD fees and low fees in general. There are no fees for regular trades, aside from spread fees for cryptocurrencies. Trading CFDs with this provider carries a risk of losing money but eToro offers a solid range of options.
- Good educational resources. If you want to understand how CFDs work and how to use the eToro platform, eToro has a lot of resources and training material to get started. You can use most of the resources even if you do not have an account.
- Good customer service team. The team can help you with figuring out social trading, conversion fees, problems with the mobile app, and other company information.
- Some fees are high. The withdrawal and overnight fees for crypto leverage are fairly high, at least compared to other trading platforms.
- High minimum deposits. You need to deposit at least £200 to get started making trading decisions. Many other brokerages do not have minimum deposits at all.
- Complex. Cryptos and CFDs are complex instruments and come with a high risk so make sure you understand how CFDs work, consider whether you understand forex brokers and whether you can afford to take the high risk.
So, at the end of the day, eToro is a good service if you want to streamline the process of cryptocurrency trades.
However, be warned. Cryptocurrencies carry an inherent risk of losing money and there is a rather large chance that you can lose money on speculation.
If you already have a working knowledge of crypto, have some experience, and have a high-risk appetite, then eToro is a provider you should consider because the execution of social trading and the company provides a good experience.