The email message reads as follows:
“The unprecedented demand for crypto, coupled with limited liquidity, presents challenges to our ability to support BUY orders over the weekend.”
Therefore, the brokerage firm has cautioned of likely “limitations to crypto BUY orders.” Furthermore, the Israel headquartered company has stated that “spreads on crypto assets may also be much wider than usual.”
The unexpected growth of the company has created new issues for the company. Brad Michelso, marketing manager of eToro, has disclosed that in the last 11 days, the platform has signed up 380,000 new clients and the trading volume had jumped 25x greater than the comparable period last year. On January 9, eToro had over 17 million clients.
Mati Greenspan, founder of Quantum Economics and ex-analyst for eToro, opined that the caution notification was “a symptom of a potential upcoming liquidity crunch.” Greenspan suggested his Twitter followers not to move funds out of the platform.
In case eToro takes steps in accordance with their email notice, clients will face limitations on maximal exposure for every crypto and likely find it impossible to open fresh positions. Greenspan detailed further stating that it implies some clients may have to wait for opening positions.
@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
I wouldn’t be moving anything right at this time. Buckle up bro.
— Mati Greenspan (tweets ≠ financial advice) (@MatiGreenspan) January 13, 2021
A week before, eToro had prohibited the EU clients from trading on margin due to a rise in market related risks and also upwardly revised the minimal deposit to $1,000, from $250, with a view to discourage fresh trading account signups.
Other cryptocurrency exchanges have also recorded a sharp rise in trading volumes. Coinbase’ daily volume rose to $9.50 billion on January 12, an increase of over 50% from its earlier record high level of $6.50 billion on Jan 9.
The number one cryptocurrency exchange by trading volume, Binance, also recorded an all-time high of $30 billion in trading volume, comfortably higher than the earlier high of $23.70 billion recorded on January 12.
Greenspan believes that other cryptocurrency exchanges will begin to face liquidity issues in the coming weeks.
Worries about limited supply of Bitcoin have been dominating the crypto sector for the past few months and crypto funds such as Grayscale starting increasing the pace of purchase.
The fund owns over $20 billion worth Bitcoin (BTC) and it continued to purchase at a rate higher than the generation of Bitcoins by miners throughout last month.