Exchange platform eToro, who is based in Israel, is struggling to keep up with surging demand for Bitcoin, sending a message to all users warning them of possible trading limits starting this weekend.
“The explosive demand for crypto, combined with limited liquidity, challenges our ability to fulfill buy orders.”
Because of this, the company is warning of “possible limitations” on purchasing crypto and that “spreads on assets may also be bigger than normal.”
— CRYPTO KOALA (@Cryptokoala_Aus) January 13, 2021
EToro has been overcome by success. Yesterday, one of its officials, Brad Michelson, said that in the past 11 days, 380,000 new accounts had been opened and that volumes had went up 25 times higher than the same period last year. As of January 9, eToro claims over 17 million users.
Founder of Quantum Economics, Mati Greenspan — formerly an analyst at eToro — said to Cointelegraph that the warning was “a sign of a potential incoming liquidity squeeze.” He recommended users against trying to remove funds off the trading platform.
I wouldn’t be moving anything right at this time. Buckle up bro.
— Mati Greenspan (tweets ≠ financial advice) (@MatiGreenspan) January 13, 2021
Should eToro go through with the new measures, users will be limited on their maximum exposure for each cryptocurrency, and could be unable to put in new buy orders. Greenspan went on to clarify by saying it means some “might have to wait to put a buy order in.”
An eToro official reported to Cointelegraph that “our experience of the 2017 rally helps us to understand the possible problems with extreme volatility in these markets. We want to make sure our clients are also fully aware of the possible risks.”
Last week, the company limited European users from margin trading because of greater market risks and brought their minimum deposits up by 400% to $1,000 as a way to lesson the number of new user registrations.
Other exchanges are also experiencing exploding volumes, with Coinbase’s volume reaching $9.5 billion, which is an increase of 50% from its last all-time high of $6.5 billion. Binance also pushed through its peak of $23.7 billion, reaching over $30 billion on January 12.
Very soon, other exchanges will begin hitting liquidity issues Greenspan says, stating it is “very likely” that we will see this happening on other systems in the future.
Worries about the limited Bitcoin supply have arose over the past six months with the giant fund Grayscale grabbing up Bitcoin at a jaw-dropping rate. The company now has $20 billion in its possession as its Bitcoin buying beats out mining production by nearly 3 to 1 in December of last year.