eToro recently announced all crypto assets held in open positions will convert to physical holdings possessing no leverage. Earlier this year eToro announced that it would move away from Contracts For Difference with regards to digital assets. This is in line with eToro’s mission to offer a brokering service that is viable for clients.
A couple of brokerage firms have been offering contracts for difference on digital currencies. Though, in order to hedge exposure, they’ve been imposing exorbitant fee on the positions held overnight. With the establishment of the virtual currency asset class, the goal was holding tokens and coins long term.
Interest charges on overnight positions
Providers of binary options trading have moved into offering virtual currency brokerage solutions. With this happening, their clients have found themselves having to pay interest charges for overnight positions. This can result in in the draining of client funds. This makes such products just as toxic to the digital currency sector as binary options were to forex brokers. Thus, the approach of eToro stands in contrast to that of other players in the sector who have been seeking to exploit the low knowledge levels of some retail clients.
The risks that come with providing CFDs on digital currencies became apparent towards the end of last year when brokers struggled to find ways of hedging their exposure as the price of bitcoin (BTC) kept on rising before it peaked just under the $20,000 level.
eToro says upgrading of still open crypto CFD positions will occur between May 15, 2018 and May 20, 2018. As for the clients who are not interested in having their open positions transferred into CFDs, they should get in touch with eToro’s customer service department before May 14, 2018.
At the moment, eToro supports a total of ten virtual currencies. These include EOS, NEO, Stellar (XLM), Dash, Ethereum Classic (ETC), Litecoin (LTC), Ripple (XRP), Bitcoin Cash (BCH), Ethereum (ETH) and Bitcoin (BTC). The most recent to be added were EOS, NEO and Stellar. eToro intends to keep adding more virtual currencies in order to allow traders the ability to diversify their portfolios. Currently, the focus is on those digital assets which have a market cap exceeding $1 billion.