eToroX Review – A Beginner’s Guide
By: Ofir Beigel | Last updated: 5/4/20
eToroX Review Summary
eToroX is an advanced, crypto only exchange that currently supports stablecoins instead of fiat currencies for most of its trading pairs. Stablecoins are issued and backed by eToro, which, in my opinion, creates a systematic risk for traders.
Overall, the exchange displays a huge leap forward in cryptocurrency adoption but is not without risk. That’s eToroX in a nutshell. If you want a more detailed review keep on reading, here’s what I’ll cover:
- Company Overview
- eToroX Services
- Currencies and Payment Methods
- Supported Countries
- Stablecoin Caveats
eToro is led by Yoni Assia who is a prominent figure in the cryptocurrency community. The company is headquartered in Cyprus and employs several hundred people.
- Transfer of crypto assets from the eToro trading platform.
- For crypto assets to be sent and received from other wallets.
- For crypto assets to be converted into other crypto assets.
The eToro wallet is a custodial wallet, meaning you don’t have access to its private keys or full control of your funds. in the end, its eToro that controls your funds.
You’ll need to log into your wallet with your eToro account credentials, however, the wallet does not reflect the same balance that you have on the eToro Trading Platform, as it is a separate, complementary product.
At the moment, the wallet supports deposits for:
- Bitcoin Cash
- OmiseGO (OMG)
- Maker (MKR) stablecoin
- Basic Attention Token (BAT)
- EURX stablecoin
- USDx stablecoin
You can send Bitcoin, Ethereum, and XRP to external wallets from the eToro wallet.
The eToroX exchange is a regulated and licensed cryptocurrency only exchange. In order to use the exchange, you’ll need a verified eToro account – this can be done through eToroX or etoro.com. eToroX allows you to trade different cryptocurrencies and eToro stablecoins.
There are no charges on deposits to eToroX.
Trading fees work on a maker-taker model. Makers, people who add limit orders to the order book are charged with a fee between 0.1%-0.03% depending on their order size.
Takers, people who fulfill existing orders from the order book are charged with a fee between 0.24%-0.12% depending on the order size.
Withdrawals have a fee that differs depending on which coins you’re withdrawing. You can view the complete fee schedule here.
Currently, it is only possible to deposit cryptocurrencies into eToroX.
eToroX supports the following cryptocurrencies:
- Bitcoin Cash
eToroX is a cryptocurrency only exchange. Instead of using fiat currencies to trade against cryptocurrencies, eToroX uses stablecoins. There are 12 different stablecoin tokens available on eToroX:
- USDEX (pegged to the US Dollar) | Total supply: 500,000
- EURX (pegged to the Euro) | Total supply: 1,000,000
- GBPX (pegged to the British Pound) | Total supply: 500,000
- JPYX (pegged to the Japanese Yen) | Total supply: 56,000,000
- RUBX (pegged to the Russian Ruble) | Total supply: 500,000
- CADX (pegged to the Canadian Dollar) | Total supply: 500,000
- CNYX (pegged to the Chinese Yuan) | Total supply: 500,000
- AUDX (pegged to the Australian Dollar) | Total supply: 500,000
- NZDX (pegged to the New Zeland Dollar) | Total supply: 500,000
- CHFX (pegged to the Swiss Franc) | Total supply: 500,000
- GOLDX (pegged to gold) | Total supply: 390
- SLVRX (pegged to silver) | Total supply: 33,700
Keep in mind that total supply of stablecoins can change in the future through minting by eToro
How eToro stablecoins work
eToro Digital Assets Ltd. (another eToro subsidiary) issues erc-20 tokens (i.e. Ethereum tokens) that represent fiat currency. For example, EURX is a digital token that strives to maintain the value of 1 EUR. CADX strives to maintain the value of 1 CAD and so on.
How is the value maintained?
Well, eToro Ltd. (the parent company), acts as a market maker. This means that eToro ltd. is like a central bank, buying and selling eToro stablecoins on the eToroX exchange in order to maintain the peg to the desired value.
A complete breakdown of these tokens, their whitepaper and important risk warnings can be found here. For now, here’s a one sentence summary of the main risk warnings:
The value of these tokens may fall below their peg under extreme market conditions. If that’s the case, there’s not much you can do about it. There’s no way to redeem these stablecoins for the asset they represent or have any claim against eToro.
The eToroX Exchange currently supports the following countries:
Aland Islands, Algeria, Andorra, Angola, Argentina, Armenia , Austria, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belgium, Bermuda, Bhutan, Bolivia, Brazil, Brunei, Bulgaria, Cameroon, Cayman Islands, Chile, Columbia, Costa Rica, Côte d’Ivoire, Croatia, Cyprus, Czech Reupblic, Denmark, Dominica, Dominican Republic, Ecuador, Egypt, Estonia, Finland, France, Georgia, Germany, Ghana, Gibraltar, Greece, Greenland, Grenada, Guadeloupe, Guatemala, Guernsey, Hong Kong, Hungary, Iceland, India, Indonesia, Iraq, Ireland, Isle of Man, Israel, Italy, Jamaica, Jersey, Jordan, Kazakhstan, Kenya, Kuwait, Kyrgyzstand, Latvia, Lebanon, Liechenstein, Lithuania, Luxembourg, Macau, Macedonia, Malaysia, Maldives, Malta, Martinique, Mauritius, Mayotte, Mexico, Moldova, Monaco, Mongolia, Montenegro, Morroco, Mozambique, Netherland, Netherlands Antilles, Nigeria, Niue, Norway, Oman, Pakistan, Palestinian Territory, Panama, Peru, Phillipines, Poland, Portugal, Qatar, Reunion Island, Romania, Russia, Saint Lucia, Saint Vincent, Saudi Arabia, Senegal, Singapore, Slovkia, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Syria, Taiwan, Tanzania, Thailand, Trinidad and Tobago, Tunisa, Ukraine, United Arab Emirates, United Kingdom, Uruguay, Venezuela, Vietnam, Virgin Islands
The following countries are restricted:
Afghanistan, Albania, Belarus, Bosnia and Herzegovina, Botswana, Burundi, Canada, Chad, Congo Republic, Cuba, Ethiopia, Guinea, Guinea Bissau, Guyana, Iran, Japan, Laos, Libya, Mali, Mynamar, Namibia, Nicaragua, North Korea, Palau, Puerto Rico, Samoa, Serbia, Somalia, Sudan, Syria, Turkey, Uganda, United States, US Virgin Islands, Yemen
I think stablecoins are a great idea, however, in essence, they pose a certain risk. Mainly if the peg of the stablecoin breaks. When the market is calm, a peg is relatively easy to maintain, however, sometimes events can happen that will break the peg.
Maintaining a peg isn’t a simple task, even for fiat currencies.
Some well-known examples where pegs were broken are the Swiss Franc peg to the Euro in 2015, the Chinese Yuan to the US dollar in 2005, the Thai Bhat peg to the US dollar in 1997 and the most famous of them all, the gold standard – pegging the US dollar to gold in 1971.
For an in depth explanation about Stablecoins watch this video:
Moving on to eToroX stablecoins it’s important to read through eToro’s risk warnings and transparency documentation. The process of issuing eToro stablecoins can be boiled down to this:
eToro creates their own tokens and lists them on their platform. These tokens are then sold to consumers in exchange for major cryptocurrencies like Bitcoin and Ethereum while eToro maintains the peg through additional counter transactions.
There are several caveats that are important to be aware of before using eToroX stablecoins. I’ll try to sum them up in plain English. Note that the below statements are all taken straight from the different eToro websites:
What are the eToroX tokens actually worth?
Tokenholders will only be able to sell their tokens if there is someone willing to buy their tokens…
Although in normal market conditions the Market Maker will seek to make offers to buy tokens through eToroX, it is not obliged to buy tokens from tokenholders…
Abnormal market conditions are a prescribed set of exceptional circumstances in which the Market Maker is not obliged to make offers to buy and sell the tokens through eToroX.
Abnormal Market Conditions broadly includes the following circumstances: (a) extreme volatility impacting the majority of our tokenized assets or their underlying;
If a tokenholder cannot sell their tokens, they will not be able to recover any capital they have invested in the tokens…
This basically means that there’s no guarantee eToroX token will be worth something. If the market becomes too volatile, eToro does not guarantee it can buy them back from you.
Do I have any recourse in case the value of my tokens drop?
tokenholders have no right to enforce the obligation to make a market in the tokens against the Market Maker….
The tokens are not regulated instruments…..tokenholders will not be clients of the Market Maker meaning they will not benefit from protections afforded to clients of the Market Maker.
The tokens do not give tokenholders any rights in relation to the underlying asset
Tokenholders do not have the right to redeem their tokens against any eToro entity.
This means that you will not be able to pursue any legal action against eToro or demand the actual asset represented by the stablecoin in case your token value drops. In other words, at this current stage, you won’t be able to redeem EURX for actual Euros.
To sum it up, on the contrary to what many people think, stablecoins can become a risky business. This is true not just for eToroX tokens but for Tether, USDC, GUSD, and other popular stablecoins.
However, the main difference between these more established stablecoins and eToroX tokens is that they are already openly traded on other markets. While this will hopefully happen to eToroX tokens as well, that’s not the case at the moment, leaving a lot of power in eToro’s hands.
eToroX is definitely a revolutionary cryptocurrency exchange. However, I think it’s important to separate the platform from the specific eToro stablecoins.
At the moment, eToroX utilizes tokens that simulate fiat currencies (i.e. stablecoins). This entails a risk for traders that the value of these tokens may not be sustainable.
While this is true not just for eToroX tokens, but for all stablecoins, most exchanges today use more popular stablecoins like USDT or GUSD that are listed outside of the issuing exchange as well. eToroX tokens are created, controlled and traded solely through eToro.
On the other hand, eToro chose to create their own stablecoins that has yet to reach market adoption and can be traded only on eToroX.
Will they succeed? Only time will tell.
While I have faith in eToro as a platform, I would avoid storing a lot of value in stablecoins for long periods of time and mainly use them for pinpointed trading purposes
Have you used eToro X yourself? I’d love to hear about it in the comment section below.
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