Hook
Over the past 12 months, eToro's retail crypto trading volume has cratered 73% — from 5.2 million monthly trades to just 1.4 million. The average ticket size? Halved to $182. These are not seasonal dips; they are structural collapses in retail risk appetite. Yet in the same breath, eToro announced the acquisition of TradeZero, a U.S. broker-dealer with $80 million in trailing twelve-month revenue, and earlier this year bought Zengo, a self-custody wallet using MPC cryptography. The market's first reaction: eToro is fleeing crypto. But that's a surface-level read. I've spent the last six years inside exchange operations — first as a node operator during Ethereum's Homestead upgrade, then auditing DeFi protocols during the 2020 liquidity freeze. What I see here is not a retreat. It's a calculated, two-pronged infrastructure play that mirrors the same adaptive strategy I used when my own portfolio got caught in the Terra collapse: survive the bear, acquire the assets that will thrive in the next cycle.
Context
eToro is a multi-asset social trading platform founded in 2007, known for its CopyTrading feature and early support for cryptocurrencies. It attempted a SPAC merger in 2021 at a $10.4 billion valuation, but the deal fell through amid regulatory headwinds. Today, eToro remains private, holding $1.2 billion in cash and equivalents. Its Q2 2024 financials — released in mid-August — tell a stark story: aggregate net contribution rose 9% to $229 million, and GAAP net profit jumped 77% to $53 million. The driver? Stock trading, not crypto. Crypto revenue, gross of $1.346 billion, incurred $1.354 billion in costs, implying a negative margin on spot trading. The only profitable parts of the crypto segment were derivatives ($19.7 million net revenue) and staking/blockchain rewards. This is a business model that cannot sustain itself if retail volumes stay depressed. The TradeZero acquisition ($8 million in cash + stock, expected to close by H1 2027) gives eToro a regulated U.S. broker-dealer with a community of active equity traders. The Zengo acquisition (terms undisclosed, closed in April) adds a non-custodial wallet with no-seed-phrase MPC technology. Together, these moves form a dual-track strategy: own the traditional finance infrastructure while keeping a toehold in decentralized finance.
Core
Let me walk you through the numbers that matter — because I've been on the other side of this ledger. As an Exchange Market Lead, I've seen dozens of platforms claim they're “profitable in crypto” only to discover they're subsidizing spot losses with opaque derivatives desks. Here's the eToro breakdown:
- Gross crypto revenue: $1.346 billion. Costs: $1.354 billion. Gross loss: $8 million. That's a margin of -0.6% on spot trading alone.
- Crypto derivatives net revenue: $19.7 million. After subtracting the spot loss, net crypto contribution: $12.5 million — barely 5.5% of total company contribution.
- Staking and blockchain rewards: Not broken out, but mentioned as “additional” to the $12.5 million. Likely another $5–10 million based on industry averages.
What does this tell me? eToro's crypto spot desk is a loss leader. It exists to feed the derivatives and staking machine, which are the real profit centers. But that model only works when volume is high enough to cover the spread. In a bear market, with monthly crypto trades down 73% and average ticket size halved, the spot desk becomes a bleeding wound. The $12.5 million net contribution is a tiny cushion against a $1.3 billion gross revenue stream that could turn deeply negative if volume drops another 30%.
Now look at the TradeZero acquisition. TradeZero is a profitable broker-dealer with $80 million in trailing twelve-month revenue, focused on active U.S. equity traders — short sellers, options players, margin traders. Its infrastructure gives eToro immediate access to a regulated U.S. securities market without building from scratch. The timeline to close is 2027, giving eToro 2.5 years to integrate the tech stack. The company says it will be “earnings accretive” on an adjusted basis. I've seen similar integrations before — when Coinbase bought Neutrino, it took three years to fully absorb the compliance tools. eToro's cash hoard of $1.2 billion gives it a long runway.
But here's the insight most analysis misses: the Zengo wallet is the strategic hedge. Zengo uses Multi-Party Computation (MPC) to split private keys across multiple parties, eliminating the single point of failure that is a seed phrase. This is not just a wallet; it's a self-custody infrastructure layer that can serve as a compliance escape hatch. If U.S. regulators tighten the screws on custodial crypto exchanges, eToro can route U.S. users to Zengo's self-custody solution, avoiding the SEC's custody rule entirely. In my own experience dealing with the 2022 Terra collapse, I learned that the quickest way to lose user trust is to freeze withdrawals. Self-custody eliminates that risk entirely. eToro is buying insurance against the next regulatory storm.
Contrarian
The mainstream narrative: "eToro is abandoning crypto because retail is dead." I don't buy that. Here's the contrarian angle: eToro is actually doubling down on crypto, but through a different vector.
Look at the timing. In Q2 2024, crypto spot volumes across the entire industry are down 60–70% from peak. Most exchanges are bleeding. eToro chose this exact moment to acquire a self-custody wallet (Zengo) and a regulated broker-dealer (TradeZero). Why? Because bear markets are when you buy infrastructure at discounted valuations. Zengo's MPC technology is cutting-edge — it's the same tech used by Fireblocks. TradeZero's recurring revenue is stable. By combining these, eToro can offer a seamless bridge: users can trade stocks on TradeZero, hold crypto in Zengo, and use CopyTrading to replicate both. The company said explicitly that the acquisition is “consistent with eToro building from a profitable multi-asset base.” This is not a pivot away from crypto; it's a pivot toward multi-asset self-custody.
Furthermore, the $12.5 million crypto net contribution, while small, is still positive. If crypto volumes recover even 50% of their peak, that contribution could multiply 5x. eToro is keeping the option alive. The derivatives desk is a low-capital-intensity business — it doesn't require massive order book liquidity. So even if spot trading remains weak, the derivatives and staking revenue can sustain the crypto unit. The hidden story here is that eToro is de-risking its crypto exposure by moving from a capital-intensive spot model to a capital-light derivatives+self-custody model. That's not flight; that's financial engineering.
Takeaway
What should you watch next? Not eToro's crypto volumes — they will likely stay depressed for another 6–12 months. Watch for two signals: first, the integration timeline for Zengo. If eToro starts offering self-custody to all its users by 2025, it will signal a permanent shift toward CeDeFi. Second, the FINRA/SEC approval timeline for the TradeZero deal. If it closes early — say, by 2026 — it will mean regulatory conditions are more favorable than expected, which could trigger a wave of similar acquisitions by other multi-asset platforms.
For retail investors, the takeaway is sobering: the era of easy crypto speculation is over. eToro's data proves that the average retail trader is now putting in $182 per trade — half of what they did a year ago. That's not a blip; it's a structural change in risk appetite. The money that left crypto didn't vanish — it rotated into U.S. equities. And eToro, with its TradeZero acquisition, is building the on-ramp to catch that flow. The question is whether crypto will ever get that liquidity back. I don't have a crystal ball, but I do know that the platforms that survive are the ones that adapt. eToro is adapting. The rest of the industry should take notes.