Zero Commission Stock Trading The Evolution Continues

For years, retail and institutional investors had grappled with commission fees that ate into earnings.

There was, in fact, very little reason for the online trading world to change tact, after all, it was the standard across the industry.

It all changed back in the 4th quarter of 2019, however. It was inevitable that one of the largest online platforms would take the 1st step as the on-line trading industry became more cutthroat, with brokers batting for clients in a relatively saturated market place.

The change was not only significant but also out of the blue. Online trading platforms used to charge as much as US$7 for each trade. When considering the size of the on-line stock trading market, this translated into significant revenues for brokers and materially reduced earnings for investors.

In 2017, the major brokerages cut fees and market volatility in 2018 saw brokers bleed. That paved the way for 0% commission trading that hit the on-line stock trading world in 2019.

This market volatility and slide in broker income was not just seen in the U.S but also across the Pond.

eToro was well placed and nimble enough at the time to follow the trend from the U.S and shift the landscape in Europe.

Why the Need for Change?

While there has been a marked growth in online trading platforms, supporting the trade of stocks globally, some fared better than others.

While the likes of Charles Schwab was certainly amongst the leaders in the U.S, eToro was and remains a front runner in Europe.

It was for this very reason that Schwab was able to catch the markets off guard late last year and for eToro to set the trend in Europe.

While the market balked at the concept of dropping commission fees, it is worth noting that fees were not dropped for all investment strategies and services.

The decision to cut commission fees and offer 0% commission trading was ultimately made to lure investors away from banks and other platforms that held commission fees unchanged.

It wasn’t just the existing investor base that eToro and others were interested in. The removal of fees also drew in new investors, which was key.

A larger client base provides a significant opportunity to cross-sell other investment products, where commission fees remain.

With the U.S and European equity markets hitting fresh record highs at the turn of the year, investors will have certainly enjoyed better returns after being freed from punitive commission fees.

Investor Benefits

Market access to a wide range of stocks offered under the zero-commission scheme is certainly an exciting proposition for investors and traders.

There is absolutely no reason for investors and traders to show loyalty to platforms that continue to eat into earnings.

For investors and traders, higher profit margins as a result of 0% commission trading increases interest in alternative asset classes.

Just in the last week, we saw the global equity markets bleed in response to the spread of the coronavirus.

In stark contrast, the cryptocurrency market was on the move, finding sizeable inflows as a hedge.

This was not a one-off, with the rise in tensions between Iran and the U.S also leading to a spike in the crypto market.

Investors and traders have benefitted, not only from the vast number of 0% commission stocks on offer but also from eToro’s crypto asset class offering.

For investors, this is an undeniable benefit, while eToro also sees a jump in its investor base.

Ultimately that is essential for a successful platform as it delivers liquidity for investors and traders across the eToro platform. This is particularly important in volatile markets…

The Now

One thing is for certain, the trading world has grown over the last decade. We’ve seen geopolitical risk take center stage since Trump’s President Election victory back in 2016.

Retail investors across Europe have historically accounted for a small proportion of the equity market investor base. High commission fees and inaccessibility left many out in the cold

That has now changed and eToro’s decision to go commission-free on an array of stocks has driven that change.

For investors, it’s not just the crypto world that is on offer.

eToro also offers Indices, Exchange-Traded Funds. Even FX has seen volatility on the rise, drawing investors in.

The benefit for a trader and investor is the one-stop-shop that eToro offers, which allows investors and traders to more efficiently manage P&L. There’s no need to have multiple platforms to cover the ever-widening range of asset classes on offer.

Looking at eToro’s European platform, eToro not only offers zero commission on trades but also:

  • Zero stamp duty for UK investors. Under UK law, investors must pay stamp duty.

eToro goes a step further than others by paying this for investors.

  • No limit on trading volume.
  • The offer of fractional shares.
  • Free access to TipRanks expert stock analysis.

It is fair to say that brokers who held onto their trading commission fees have little time left. The 0% commission stock trading world has become the norm.

The Future

For investors who may have cashed out, with global equity markets having hit record levels, there is something to consider.

As the global equity markets become more accessible to the untapped, bourse market caps are inevitably going to rise.

An increase in the retail composition across the more institutionally biased equity markets of Europe and the U.S will also see volatility pick up. We’ve seen the crypto world draw seasoned traders away from the more traditional asset classes in search of volatility.

eToro is ideally positioned to allow its client base to benefit and to offer the same seasonal investors access across multiple asset classes.

It’s certainly an exciting time for the global financial markets and traders entering the online trading world.

Satoshi delivered Bitcoin to remove the banking world’s grasp on payment platforms.

eToro may well eat into the banks’ trading monopoly.

With the zero-commission investing now on offer, we will also see a rise in the offering of fractional share trading.

eToro is already there. Evolution suggests that fractional trading is next, just as we have seen across the crypto market.

After all, not everyone is able or wants to stump up $9,000 for a single Bitcoin…

That would grant the less wealthy investor access to a whole new world. Even the likes of, Tesla, and Berkshire Hathaway, the world’s most expensive stock, would be within reach.

Zero commission is only available to clients of eToro Europe Ltd. and eToro UK Ltd., and does not apply to short or leveraged stock trades. Zero commission means that no broker fee has been charged when opening or closing the position. Other fees may apply. For additional information regarding fees click here. Your capital is at risk.

eToro Signals Commitment to Growth With Acquisition of Delta

Global multi-asset investment platform eToro has today announced the acquisition of Delta for an undisclosed amount. Delta helps investors make better decisions regarding their crypto investments by providing tools such as portfolio tracking and pricing data.

Commenting on the news, Yoni Assia, Co-founder and CEO of eToro, said:

We are excited to announce that Delta will become part of the eToro Group. This is our second acquisition this year and reflects our commitment to continued growth and innovation. When we started eToro our goal was to disrupt the world of trading. We wanted to change the way people think about trading and investing, ultimately reducing dependency on traditional financial institutions and make trading and investing more transparent and fun. This mission remains our guiding light and we will continue to evolve both organically and by acquisition in order to bring our customers the very best experience.

Delta is a crypto portfolio tracker app with over 6,000 cryptoassets available from more than 180 exchanges. It provides investors with a range of tools to track and analyze their crypto portfolios. To date, Delta has been downloaded by over 1.5 million users and has hundreds of thousands of active monthly users. The app is known for its superior quality which is reflected in extremely popular users reviews (4.8 average on iOS and 4.6 on Android) and its award winning user interface (2018 Webby Judges Award Winner for best mobile app UI/UX).

Nicolas Van Hoorde, CEO of Delta, commented:

“This acquisition makes sense for Delta, eToro and most importantly our respective users. There are strong synergies between the two companies and we have many shared values, in particular the focus on community and continuous innovation. Both companies have been successful because we’ve built supportive and engaged communities and have a commitment to build user-first, cutting edge technology.”

eToro was founded in 2007 with the vision of opening up global markets so that everyone can trade and invest in a simple and transparent way. While this core vision remains unchanged, new technology namely blockchain, means that the eToro business has, and will continue to, evolve. In 2018, eToro created eToroX, its blockchain subsidiary. eToroX provides the infrastructure, in the form of a crypto wallet and exchange, that supports eToro’s commitment to facilitating the evolution of tokenized assets.

Doron Rosenblum, Managing Director of eToroX, the blockchain subsidiary of eToro, added:

“I’m thrilled to welcome Delta to the eToro family. They have a fantastic product which we believe will make a great addition to our crypto offering. We will be exploring how we can continue to diversify Delta, and will integrate with eToroX so customers can trade from within the app, and also looking to broaden the scope beyond crypto to reflect the many different asset classes offered by eToro.”

The Delta team under the leadership of Nicolas Van Hoorde will become part of eToroX reporting to Doron Rosenblum. The team will continue to be based in Belgium, working in close collaboration with eToro and eToroX employees across the globe.

“At a time when other fintechs state that they are not even targeting profitability, we are proud to be a well funded, profitable business that is growing both in terms of geographical coverage but also product range, concluded Yoni Assia. “We are a trading and investing platform that not only provides clients with access to the assets they want from commission-free stocks and ETFs through to FX, commodities and cryptoassets, but also lets customers choose how they invest. They can trade directly, copy another trader or invest in a portfolio. We believe in empowering our clients and the acquisition of Delta will allow us to add an important new element to our offering.”

Crypto Trading With eToro

Traders, whether or not they believed in the long-term future of cryptocurrencies, and opinion was certainly divided on that question, absolutely loved their volatility. If great trading opportunities only occur in traditional assets occasionally and often bursts when something in particular is influencing the market, crypto prices were moving by similar amounts every single day. And when particularly volatile could make double figure swings in a matter of hours. 

For traders with a higher risk profile, and even those who hadn’t previously traded but had a keen interest in the cryptocurrency market, that was a very interesting proposition. So trading platforms introduced cryptocurrency CFDs and they have been the fastest growing part of their business ever since. 

With Facebook announcing its own huge plans to introduce a digital currency, Libra, it believes could completely change currency markets and financial services globally, sometime in 2020, interest, and volatility, is expected to spike again over coming months. Traders are rubbing their hands in anticipation!

About Cryptocurrencies

Cryptocurrencies were introduced in 2009 with the launch of Bitcoin. To this day nobody knows who exactly invented Bitcoin and the blockchain technology that supported it. The individual(s) went by the pseudonym Satoshi Nakamoto and have never been discovered. But it started a movement that has had its ups and downs as the cryptocurrencies market has gone through growing pains but still seems likely to forever change money and commodity markets and financial systems. 

So what’s so special about cryptocurrencies and why do some people think they are a better solution than the currencies we already have like the dollar, pound and euro?

The criticism of fiat currencies, which is what traditional currencies are called since the gold standard ended, is twofold. Firstly, central banks have the power to print money whenever they want to manipulate the economy. They would argue ‘stimulate’ but the fact is when new money is printed and injected into the economy it increases the overall supply. Supply and demand dynamics means this reduces the purchasing power of all of the currency in circulation which is one of the main reasons behind why we have inflation. And inflation erodes the value of money people keep in the bank. This either hinders them building wealth or forces them into risky investments to keep ahead of inflation. 

The biggest beneficiaries of the investment industry are financial institutions. But these financial institutions have another role – the fiat system makes them necessary, as central authorities controlling the monetary system. When you transfer money from your bank account to someone else’s, one financial institution has to verify you have that money in your account and improve the transfer. Another couple at least are involved in processing your transfer and then the recipients bank has to confirm it. They all take a fee. 

This also means that a relatively small number of huge financial institutions have a huge amount of wealth and influence in the world. 

Bitcoin’s revolutionary blockchain technology theoretically changed all of that. Its peer-to-peer system means ownership and transactions of Bitcoin are verified by the system itself in an automatic and highly secure (using cryptography) way. Also, the number of units ever in circulation was capped from the beginning. So no money printing, no inflation and no need for central authorities. 

Another kind of cryptocurrency also appeared – utility tokens. These are not intended as a fiat money alternative but are used to pay for the use of a blockchain platform with a particular utility – like Ethereum for smart contracts and decentralised apps or Ripple, a blockchain-based payments system. Their scarcity and equally volatile exchange trading value have also made the largest popular with traders. 

Trading Cryptocurrencies as CFDs

Initially, cryptocurrencies could only be traded with actual ownership changing hands over cryptocurrency exchanges. Much like stocks on a stock exchange. But as already mentioned, by popular demand CFDs brokers subsequently introduced cryptocurrency CFDs. This opened up a whole new world for cryptocurrency investors, offering many of the same variety of options to investors as they have when trading other traditional investment instruments.

Why Trade Cryptocurrencies?

The introduction of cryptocurrency CFDs added to the existing advantage of trading cryptocurrencies – the potential for very large long term gains if they became established and being able to profit from sometimes significant price gains over days, weeks, months or years. 

CFDs allowing for leveraged trading, though at reduced levels due to the volatility of CFDs, introduced new options for traders. They were now able to both multiply their larger gains (at the risk of multiplying any losses by the same degree) and also potentially make significant returns from smaller price movements. 

Cryptocurrency CFDs also crucially meant that traders could not also take short positions. So downwards price swings became just as good potential trading opportunities as upwards price movements. 

Trading Cryptocurrencies With eToro

eToro offers one of the most developed and popular options for trading cryptocurrencies. Cryptocurrency traders can open an account within 10 minutes – even less if they don’t want to create a full profile to enjoy all of the benefits of social copy trading.

The broker also offers one of the fullest cryptocurrency offerings. A total of 15 different cryptocurrencies can be traded, 15 crosses between two different cryptocurrencies and 62 different crypto and fiat currency pairs. 

eToro also offers a copy trading platform which allows traders to mirror, with the flexibility to adapt how closely, the trades of other traders. With their full historical trading record publically available, less experienced cryptocurrency traders can choose the most successful traders on the platform to copy. And successful cryptocurrency traders can also allow other traders to follow and copy their trades, earning a percentage of the spread for each trade made that copies their positions. 

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.

Past performance is not an indication of future results.

3 Reasons Why Bitcoin is Still King of Crypto

Over its ten years of existence, Bitcoin has managed to stay ahead of the pack, and while other cryptos offer various advantages in terms of technology, speed and usability, Bitcoin is still the most dominant crypto coin, accounting for more than 50% of the market. But why is Bitcoin still number 1? Here are three reasons to consider.

1. A Major Head Start

One of the main advantages Bitcoin had over its counterpart is the fact that it existed. It took about two years between the time the first Bitcoin was mined in 2009 until other cryptos emerged. By that time, Bitcoin has already being used by early adopters for payment and money transfer and had a real-world value of around $13 per 1 BTC.

There were already more than 8 million Bitcoins in circulation when the second cryptocurrency was launched, giving it a market cap of more than $100 million at the time. Naturally, back then Bitcoin accounted for much more of the market than its current 50%+, but even as more cryptocurrencies were constantly introduces, some gaining great popularity, such as Ethereum and XRP, to this day, no other crypto has been able to reach a market cap that is even half that of Bitcoin.

2. Mainstream Acceptance

As Bitcoin grew in popularity and value, an increasing number of mainstream investors began to turn to it as a legitimate option. The currency’s extreme volatility, that often amounted to double-digit movements over a single day, made it an alluring option for those speculating to make short-term profits. Remaining in the spotlight, “Bitcoin” was almost synonymous with “cryptocurrency,” and was often mentioned when discussing the introduction of crypto into mainstream markets and regulatory issues.

Bitcoin also started being accepted as a legitimate form of payment. The first such transaction was made in 2010, when two pizzas were purchased for the price of 10,000 BTC. Today, numerous companies accept Bitcoin payments, ranging from travel companies such as Expedia to fast food chains such as KFC.

To this day, Bitcoin continues to be the yardstick by which all other cryptos are measured. Several high-profile, well-known investors, such as the Winklevoss Twins (made famous due to their role in creating Facebook), started petitioning to introduce Bitcoin into mainstream markets. The SEC began receiving applications for Bitcoin-based ETFs and several popular exchanges began offering Bitcoin futures to their clients. Moreover, in recent years, financial giants such as Goldman Sachs and Morgan Stanley began offering their clients several Bitcoin-related services further pushing the digital currency into the mainstream.

3. The Popular Vote

In 2012, the then-popular TV drama The Good Wife aired a Bitcoin-centric episode entitled “Bitcoin for Dummies.” This was one of several instances that began putting Bitcoin in popular consciousness. At first, Bitcoin was more infamous than famous, with the cryptocurrency being linked to black market deals, including the notorious Silk Road platform, whose users opted to use the coin due to its ability to keep both parties of a transaction anonymous.

However, Bitcoin’s image was later cleaned up and popularized, mainly due to its rapid price increase, reaching an all-time high of nearly $20,000 in late 2017. By then, everyone was talking about Bitcoin, both in financial media and pop culture, including hit shows such as The Big Bang Theory, which discussed the crypto in their stories. In pop culture, most of the references made were about Bitcoin, which kept its popularity steady – and well ahead of its altcoin counterparts.

Whether or not other cryptocurrencies ever reach the popularity or market cap of Bitcoin remains to be seen. However, with its enormous current market share of more than 50%, its constant referencing in popular culture, and ongoing efforts to introduce it into mainstream financial markets, Bitcoin is still the king of crypto – and it is hard to believe it will be dethroned anytime soon.