Why eToro Is Bad for Cryptocurrency Trading

Imagine this: You're excited about getting into cryptocurrency trading. You’ve read up on Bitcoin, Ethereum, and the rise of decentralized finance. You’ve seen stories of people making thousands, even millions, from savvy investments. You’re ready to dive in, and then you choose a platform like eToro. But what if I told you that using eToro for cryptocurrency trading might actually be a terrible decision?

Let’s unravel why eToro might be the worst place for your crypto journey.

1. High Fees and Hidden Costs

eToro markets itself as a user-friendly platform for trading various assets, including cryptocurrencies. However, the fee structure is far from straightforward. When trading cryptocurrencies on eToro, users are subjected to wide spreads. These spreads are effectively hidden fees that can make trading significantly more expensive than on other platforms. For instance, while buying Bitcoin or Ethereum, the spread could be as high as 1-2%. This might not seem like much at first glance, but it adds up quickly, especially for frequent traders.

In addition to spreads, eToro charges withdrawal fees and inactivity fees, further eating into your profits. These hidden costs can make it hard to understand the true cost of trading on eToro.

2. Lack of True Ownership

When you buy cryptocurrencies on eToro, you don’t actually own the coins. Instead, you’re buying a contract that tracks the price of the cryptocurrency. This arrangement is known as a Contract for Difference (CFD). With CFDs, you have no access to the underlying asset, which means you can’t move your cryptocurrencies to a private wallet or use them for transactions. This lack of ownership is a significant disadvantage for those who want to hold their crypto long-term or use it in the broader blockchain ecosystem.

3. Limited Cryptocurrency Options

eToro offers a limited selection of cryptocurrencies compared to other dedicated crypto exchanges. As of now, only about 30 different cryptocurrencies are available for trading on eToro. This might sound like a lot, but in the fast-paced world of crypto, where hundreds of new projects and tokens are emerging, having limited options can be restrictive. For traders looking to explore altcoins or get in early on new projects, eToro’s limited offerings can be a significant drawback.

4. Regulatory and Geographical Restrictions

eToro operates under strict regulatory environments in various countries, which can limit the trading options and leverage available to users. For example, cryptocurrency trading on eToro is not available in some jurisdictions, and in others, certain features are restricted. This regulatory landscape can be frustrating for users who are looking for a seamless and unrestricted trading experience.

Moreover, these restrictions can lead to unexpected account closures or limitations on withdrawals, adding a layer of uncertainty and risk for users.

5. Poor Customer Support

In the world of finance and investment, customer support is crucial. Yet, eToro has been criticized for its lackluster customer support. Many users report long wait times for responses and inadequate help when issues arise. In the volatile world of cryptocurrency, where prices can change dramatically in minutes, slow or unhelpful customer service can result in missed opportunities or significant financial losses.

6. Social Trading – A Double-Edged Sword

One of eToro’s unique selling points is its social trading feature, which allows users to copy the trades of successful investors. While this might sound appealing, it’s a double-edged sword. Relying on social trading can lead to complacency, where traders do not conduct their own research or understand the assets they are trading. Moreover, just because a trader has been successful in the past doesn’t guarantee future success. Markets, especially cryptocurrency markets, are incredibly volatile and unpredictable.

7. Security Concerns

Security is a paramount concern in the cryptocurrency space. While eToro is a regulated platform, it has had security incidents in the past, including data breaches. The lack of direct ownership of your crypto assets on eToro means that if the platform were to be compromised, users could be left with little recourse to recover their funds. In contrast, dedicated cryptocurrency exchanges and private wallets provide more control over your assets.

8. Limited Educational Resources

For beginners, education is key. Understanding how markets work, the technology behind cryptocurrencies, and the nuances of trading are all essential for making informed decisions. While eToro does offer some educational resources, they are not as comprehensive or in-depth as those found on dedicated crypto platforms like Binance Academy or Coinbase Learn. Without robust educational support, new traders might find themselves at a disadvantage, making costly mistakes that could have been avoided with better resources.

9. Inadequate Trading Tools for Advanced Users

For advanced traders, the lack of sophisticated trading tools on eToro can be a deal-breaker. Unlike other platforms that offer a wide range of order types, charting tools, and technical analysis features, eToro’s trading interface is relatively basic. This limitation can hinder advanced trading strategies, such as algorithmic trading or high-frequency trading, which rely on a more sophisticated set of tools and data analytics.

10. Potential for Market Manipulation

Given the relatively low liquidity of some cryptocurrencies on eToro, there is potential for market manipulation. Low liquidity means that large trades can significantly impact the price of an asset, which can be exploited by manipulative traders. This risk is further exacerbated by the social trading feature, where inexperienced traders might blindly follow such manipulative strategies, resulting in substantial losses.

Conclusion: Is eToro Right for Crypto Trading?

While eToro offers an accessible entry point for those new to trading, its platform has several significant drawbacks for cryptocurrency traders. From high fees and hidden costs to limited ownership and security concerns, eToro may not be the best choice for those serious about cryptocurrency trading. For those looking to delve deep into the world of crypto, other platforms offer better security, more ownership, and a wider range of tools and resources.

In summary, if you're serious about cryptocurrency trading, it might be best to explore more dedicated, transparent, and user-focused platforms.