eToro has sent out an email to clients informing them that all outstanding open positions in crypto assets will be switched to physical holdings with no leverage. The company has undertaken the step earlier this year, deciding to switch away from CFDs on this asset class.
The approach of the social trading provider is consistent with the long-term interest of the industry to provide a viable broking service for clients. A number of brokerages started providing CFDs on cryptocurrencies, but to hedge their exposure, the firms have been charging exorbitantly high fees on positions that are held overnight.
Since the establishment of the cryptocurrency asset class, the main function of the coins and tokens has been to hold them long term.
Going Against “Crypto Brokers”
Former binary options technology providers have switched into providing cryptocurrency brokerage solutions. The catch for clients that do not read the fine print this time around is not an inconceivable bonus condition, but overnight interest rate charges.
What the turnkey “crypto broker” technology providers have in store is a product that is designed to drain the funds from the account of the end-client. As such, these products are likely to become as toxic to the cryptocurrency industry, as binary options have been for forex brokers.
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eToro’s approach to the market is in stark contrast to the “Wild West” honchos that are aiming to take advantage of the ill-informed retail client.
Physical Holding of Cryptos
Back in February this year, the CEO of eToro, Yoni Assia shared with Finance Magnates in an extensive interview why purchasing cryptocurrencies for retail traders have to be executed on the physical market.
As the evolution of cryptocurrencies is just starting, eToro’s approach is likely to build a solid reputation for the company in an environment where few brokers that are offering cryptocurrency trading are actually looking after the best interest of their clients.
The risks associated with offering CFDs on cryptos have been underscored in the final quarter of last year. Brokers were struggling to find ways to hedge their exposure as the market relentlessly kept going up until Bitcoin peaked out just below $20,000. The FCA has also expressed a stance that is undermining the relevance of CFDs on cryptocurrencies.
In its letter to clients, eToro underscores that all legacy crypto CFD positions that are still open will be upgraded between the 15th and the 20th of May. Clients who do not wish to transfer their open positions into CFDs can contact the customer service department of the social trading brokerage before the 14th of May.