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eToro struggling to meet unprecedented crypto demand due to low liquidity

Benson Toti

The eToro mobile app

Multi-asset brokerage platform eToro has revealed that it is currently struggling to meet the unprecedented demands for cryptocurrencies amidst liquidity shortages

eToro has warned its users that buying Bitcoin and other cryptocurrencies would prove challenging over the coming weekend due to limited liquidity. This comes as Bitcoin’s price slowly marches back towards the $40,000 mark after declining to $30,000 at the start of the week.

The multi-asset brokerage platform issued the warning via email sent to customers. According to the Bloomberg report, the Israeli-based broker told customers that it would take specific actions to curb the enormous demand for cryptocurrencies.

eToro informed its customers that they could face possible limitations to their orders due to the difficulties in processing buy orders. Hence, it may impose certain limitations for customers looking to buy cryptocurrencies to help the platform overcome the complications arising from a lack of market liquidity.

The platform revealed it could set a temporary limit on the maximum amount of cryptocurrency a client can buy. In a copy of the letter posted online, eToro told customers that it might also suspend their ability to place new orders.

eToro wrote, “The unprecedented demand for crypto, coupled with limited liquidity, presents challenges to our ability to support BUY orders over the weekend”. The platform has grown to become one of the leading cryptocurrency brokers in the world.

The company’s marketing manager Brad Michelson revealed that over the past 11 days, eToro recorded 385,000 new users, and their trading volume was 25 times higher than it was in the same period in 2020.

Besides limiting the buy orders, eToro will implement other measures to curb the massive demand for cryptocurrencies. The broker said it would increase the spreads on crypto assets to accommodate the increasing demand.

The massive volatility in the cryptocurrency and low liquidity has forced eToro to make such decisions. The platform also warned its users that it might make further changes to their cryptocurrency offerings at very short notice.

Institutional investors have been taking up considerable positions in the cryptocurrency markets in recent months. The likes of MicroStrategy, Grayscale, Skybridge, Square and others have pumped billions of dollars into the Bitcoin market in recent weeks.

Mining Bitcoin is now more challenging thanks to the halving event that took place in May 2020, reducing the mining reward to 6.25 BTC per block from 12.5 BTC. With Bitcoin and other cryptocurrencies performing well, most people are hodling their crypto assets. Hence, creating further scarcity in the market.

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