eToro Review 2021: Practice Crypto Trading, Plus Novel Social Features – NextAdvisor

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eToro opened to U.S. investors as a cryptocurrency exchange in 2018. Outside the U.S., international investors have used eToro to trade global currencies (known as forex trading), commodities like gold, and stocks since it was founded in 2007. In the U.S. though, eToro operates solely as a cryptocurrency exchange.

Anyone in the U.S. can create an account on eToro, but crypto trading is limited to residents of 43 states. If you live in Delaware, Hawaii, Minnesota, Nevada, New Hampshire, New York, or Tennessee, you can’t buy or sell crypto on the platform.

eToro has a relatively simple interface and tools for beginners, as well as more advanced features for experienced traders. But what really sets it apart from many other platforms is its extra features. To start, you can use eToro’s virtual portfolio to trade up to $100,000 worth of practice virtual funds before investing any of your real money. You can also make your investment more social by following and incorporating the trading strategies of the platform’s top users (non-experts who meet criteria based on the amount of time they’ve traded on the platform, amount invested, and risk profile).

Here’s everything you need to know before you invest with eToro:

Pros and Cons of eToro

Pros

  • Straightforward spread-based fees (varies depending on cryptocurrency)

  • Desktop and mobile options

  • “Virtual Portfolio” and education hub for beginners

  • Community network of users

Cons

  • Only about 20 coin options

  • Fees can vary widely

  • Not available in all states

  • Higher account minimums ($50 to deposit, $25 to trade) than some other exchanges

  • Can’t transfer coins from the eToro Wallet back onto eToro exchange platform

eToro At A Glance

  • More than 20 cryptocurrencies available for trade
  • Spread fees based on type of crypto (generally between 0.75% and 5%)
  • Minimum account deposit of $50
  • Crypto trading minimum of $25, or $200 if you’re using CopyTrader
  • Free virtual portfolio worth $100,000 for practice trading
  • Options for “copy trading,” in which you can set your portfolio to follow the moves of “Popular Investors” on the platform
  • Option to invest in CopyPortfolios, a diversified fund made up of multiple cryptocurrencies
  • eToro Trading Academy education hub
  • Account accessible through online browser or mobile app
  • Option to keep your investment within your eToro account portfolio or move holdings onto the eToro hot wallet (or your own wallet)

Cryptocurrencies Available on eToro

eToro offers fewer cryptocurrencies than popular crypto trading platforms like Coinbase and Gemini, but it does have many of the most popular cryptos. In total, you can buy and sell over 20 coins on eToro today, including:

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • Litecoin (LTC)
  • Bitcoin Cash (BCH)
  • Uniswap (UNI)
  • Stellar Lumen (XLM)
  • Chainlink (LINK)
  • Cardano (ADA)

eToro offers crypto trading pairs (if you wanted to exchange Bitcoin for Ethereum, for example) for international users, but if you’re in the U.S., you cannot access these pairs. However, if you move your coins onto the eToro Wallet, you can make crypto-to-crypto conversions. If exchanging coins is a feature you’re looking for, other exchanges like Coinbase and Gemini’s Active Trader option allow you to more seamlessly trade crypto pairs on the platform directly.

There’s a $25 minimum for buying any cryptocurrency on eToro, but you’ll also need to fund your account with at least $50 to get started (this is also the minimum for any deposits you want to make later). There are no fees for withdrawing your funds from your eToro account, but there is a $30 withdrawal minimum.

eToro Fees

eToro’s fees are based entirely on spread — or the difference between what the crypto is selling for and what you pay for it. This spread differs depending on the coin, and eToro says it may fluctuate based on market conditions. Instead of paying this spread both when you buy and sell, eToro says you’ll only be charged once for each of your assets, when you buy.

Here are the current spread fees for some common cryptocurrencies available on eToro:

  • Bitcoin (BTC): 0.75%
  • Ethereum (ETH): 1.90%
  • Bitcoin Cash (BCH): 1.90%
  • Litecoin (LTC): 1.90%
  • Dash (DASH): 2.90%

For example, if you want to buy $100 worth of Bitcoin, the actual price you’ll pay on eToro will be more like $100.75.

Deposit Fees

There aren’t any deposit fees for U.S. users to deposit U.S. dollars into an eToro account. Currently, the platform offers three deposit options, with different minimum and maximum deposit amounts:

Deposit Type Minimum Deposit Availability
Debit card $50 Instant
Bank account $50 Instant
Wire transfer $500 4-7 business days

Withdrawal Fees

If you prefer, you can keep your crypto held within your account on the eToro trading platform, like many other exchanges. But you can also withdraw your crypto and store it using eToro’s wallet or your own crypto wallet. For U.S. eToro users, there’s no fee to withdraw money from your account on the eToro trading platform, though there is a $30 minimum.

If you use the eToro Wallet, there are some fees to keep in mind. Each time you send money from your eToro account to your eToro wallet, there’s a 0.5% fee ($1 minimum and $50 maximum). 

eToro Security

Any funds in U.S. dollars on your eToro account that you haven’t traded for cryptocurrency are held in FDIC-insured custodial accounts, and protected up to $250,000.

eToro relies on a mix of hot and cold (online and offline) storage to protect your crypto assets. 

If you leave your holdings on your account with the trading platform, eToro says they are held “mostly in cold storage.” Many exchanges leave at least a portion of their overall crypto out of cold storage for liquidity — these coins help facilitate trading activity.

The eToro Wallet, on the other hand, is a hot wallet, so it relies on eToro’s security. While the platform doesn’t offer details about its wallet security, it does say wallets are “operated according to security best practices” and have “high-level security features and standardization protocols.” It comes with an “unloseable private key service” as well, so you can recover access if needed.

In the U.S., eToro says it is registered with the Financial Crimes Enforcement Network (FinCEN) as well as with state-level regulators where it operates. It does not offer any information about crypto assets being insured in case of a hack, either with a third party policy or eToro’s own savings.

Additional Details

eToro Wallet

In addition to keeping your crypto on your eToro trading account, you can also open an eToro Wallet — the platform’s hot wallet storage service. You must have an eToro account (verified using your ID, proof of address, and other details) to use the wallet service.

The wallet service is free, but you will pay for some activities. You’ll incur a 0.5% fee when you move your crypto from your eToro account to your wallet, and there’s a 0.1% conversion fee (and $20 minimum) for any crypto-to-crypto conversions.

Today, the eToro wallet only supports Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and Stellar. If you want to make crypto-to-crypto conversions, you can only do so with these supported coins.

If you do use the wallet, you’ll be limited when you’re ready to sell. eToro doesn’t allow users to send crypto from their wallet accounts back onto the eToro trading platform. While eToro says this is a feature it plans to add in the future, it’s unusual compared to many other wallets offered by exchanges (like Coinbase). It can also be incredibly inconvenient when you want to sell or trade your coins — you’ll need to transfer them to another wallet or exchange account using its public key before you can trade.

eToro Virtual Portfolio

Before you invest your own money in crypto, you can use eToro’s virtual portfolio option to buy up to $100,000 worth of crypto and track its progress. You won’t get any real gains or losses without putting in your own money into a “real” portfolio, but you can get a sense of cryptocurrency’s volatility. Even if you have invested your own money, the virtual portfolio can be a useful way to test eToro’s more novel features, like copy trading and portfolio options. 

CopyTrader

One of eToro’s most unique features is the option to make copy trades. The platform curates a number of “Popular Investors” whose portfolios other users can follow. These users receive varying levels of pay from eToro depending on their status in the program (based on their own investment, time on the platform, and number of copiers). To mitigate risk, popular investors are given a risk score visible to all users — if their score exceeds a certain point, they can no longer be copied by other users. If you want to use the copy trading feature, you’ll need to invest at least $200 with eToro.

While it’s an interesting option, investing this way can make an already-speculative investment in crypto even more of a gamble. Because these users are generally taking part in active trading activity, it can be more risky than simply buying and holding a crypto long-term. Most copy traders also include different altcoins among their portfolios (rather than sticking to Bitcoin and Ethereum, as the experts we’ve spoken with recommend for most long-term investors), so make sure you’re prepared to take on the extra risk before considering copy trading. Even after opting in, you can stop copying another trader at any time.

CopyPortfolio

eToro is also unique in its portfolio offerings. Not only can you buy and trade specific cryptocurrencies, but you can invest in one of four cryptocurrency portfolios, which are created by eToro and rebalanced regularly. 

These portfolios include a number of different cryptocurrencies, including altcoins, so you should be prepared to take on the risk of investing in cryptos other than Bitcoin and Ethereum. There’s also an even higher minimum to take part — you’ll need to invest at least $2,000-$5,000 (depending on the portfolio you choose). Since experts recommend only investing 5% or less of your overall portfolio in crypto, these steep minimums can be an inhibitor for many, especially beginners.

Who Is eToro Best For?

eToro offers unique features for beginners looking to interact with and learn from other investors. You can talk with other users and read the comments they share about their own investment strategies, and even replicate (or just follow along with) other users’ portfolios through copy trading. Just remember you shouldn’t view these comments as recommendations, and you should be prepared for the risks of following anyone else’s investment strategies — these users aren’t experts, and not qualified to give any professional investment advice. 

The virtual portfolio feature also makes eToro a good choice for beginners who aren’t quite ready to commit their own cash, but want to gain some experience in the crypto market. $100,000 is probably much more than you’ll want to invest personally, but having a large amount of fake money to play with on your virtual portfolio can be a great way to visualize the volatile swings that are frequent in the crypto market. You can even use this feature if you live in a state that doesn’t allow access to real trading on eToro. 

And that’s something else to keep in mind if you’re considering this exchange — it’s not yet available in every state, so you’ll want to make sure you’re able to access eToro before you sign up. Another potential drawback to keep in mind is the account and trade minimums required. Compared to other exchanges, eToro charges relatively high minimums for trading on the platform, so make sure these requirements align with what you’re comfortable investing in crypto before you begin.

eToro Compared to Others

eToro Gemini Coinbase
Coins 20+ cryptocurrencies 40+ cryptocurrencies 50+ cryptocurrencies
Fees 0.75%-4.9% spread (varies by crypto) 0.50% convenience fee$0.99 to $2.99 transaction fee; 1.49% transaction fee for trades over $200 0.50% spreadTrading fee between 1.49% and 3.99% (or $0.99 to $2.99 flat fee)
Wallet storage Keep coins on eToro trading platform account, move them to an eToro wallet, or transfer to your own wallet Keep coins on Gemini account, Gemini Wallet option, or transfer to your own wallet Keep coins on Coinbase account, Coinbase Wallet option, or transfer to your own wallet
Minimum Trade $25 ($50 deposit minimum) Equal to the smallest amount of each coin that can be traded (0.00001 BTC) $2

Frequently Asked Questions

Is eToro legal in the USA?

Yes, for cryptocurrency. While eToro offers multiple investment types internationally, U.S.-based investors can only access cryptocurrency trading via the platform.

Does eToro report to the IRS?

eToro does report payments to the IRS. Unless you’re a very active trader, you’re unlikely to receive a tax form from eToro — the platform issues Form 1099-K if you made more than 200 crypto-to-U.S. dollar transactions and the value of them is more than $20,000. You may also receive a Form 1099-INT if you receive at least $10 in interest throughout the year. Remember, it’s your responsibility to track any gains or losses on your crypto holdings, and report taxable events to the IRS each year.

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