eToro warns users crypto trading may become limited due to 'unprecedented demand'

Israel-based exchange platform eToro is struggling to keep up with the demand from crypto traders according to an email sent to users earlier today.

“The unprecedented demand for crypto, coupled with limited liquidity, presents challenges to our ability to support BUY orders over the weekend.”

As a result, the platform is warning of “possible limitations to crypto BUY orders” and that “spreads on crypto assets may also be much wider than usual.”

@MatiGreenspan I know you have a mega position on $BTC on eToro, A sat for your thoughts. pic.twitter.com/Xt12bAJGxJ

— CRYPTO KOALA (@Cryptokoala_Aus) January 13, 2021

EToro has become a victim of its own success. Yesterday marketing manager Brad Michelson revealed that in the previous 11 days, 380,000 new users had opened accounts and that trading volumes had surged 25 times higher than the same time in 2020. As of January 9, eToro boasted more than 17 million registered users.

Quantum Economics founder Mati Greenspan — formerly a market analyst for eToro — told Cointelegraph that the warning notice was “a symptom of a potential upcoming liquidity crunch.” He advised users on Twitter against trying to move funds off the platform.

I wouldn't be moving anything right at this time. Buckle up bro.

— Mati Greenspan (tweets ≠ financial advice) (@MatiGreenspan) January 13, 2021

Should eToro implement the foreshadowed measures, users will be restricted on their maximum exposure per cryptocurrency, and potentially be unable to place new buy orders. Greenspan explained that it simply means some users “might need to wait in order to buy in.”

An eToro spokesperson told Cointelegraph that "In response, in the first eleven days of 2021, we have had over 380,000 new users register with eToro and crypto trading volumes of over 25x compared to the same period in 2020. We have therefore communicated with clients about the possibility of limitations to crypto buy orders this coming weekend. Our experience of the 2017 crypto rally means that we understand the possible consequences of extreme volatility in crypto markets. We want to ensure that our clients fully understand the possible risks."

Last week, the exchange restricted European users from margin trading due to increased market risks and increased the minimum deposit amount by 400% to $1,000 in an attempt to get on top of new user registrations.

Other exchanges are also seeing surging trade volumes, with Coinbase’s daily volume reaching $9.5 billion on January 12, up more than 50% from its previous all-time high of $6.5 billion on January 9. Binance has also powered past its peak of $23.7 billion, recording over $30 billion on January 12.

It is only a matter of time before we see other exchanges start to hit liquidity issues Greenspan believes, saying it is “highly likely” that we will see this situation occurring on other platforms in the near future.

Concerns around the limited Bitcoin supply available have risen to the foreground over the last six months with investment giant Grayscale snapping up Bitcoin at an alarming pace. The firm now has $20 billion under its control as its Bitcoin (BTC) buys outstrip mining production by almost three to one throughout December 2020.

Update 1/14/21 at 11:16am ET: Added comments from eToro