This Crypto Accounts for the Most eToro Trades. (Hint: It's Not Dogecoin)

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eToro's Q2 results show us where traders are putting their money.

eToro is an international brokerage that trades in equities, commodities, crypto assets, and currencies. Its Q2 results contain some interesting insights into the crypto world. Not only did crypto trading account for almost three-quarters (73%) of the brokerage's Q2 commissions, but its crypto revenue is also up about 2,300% from the year before.

That 73% figure is striking because crypto commissions only represented 7% of the total in the same period last year. This is one of the many indications of how much cryptocurrencies have grown in just 12 months.

In total, eToro charged about $362 million in commissions and trading interest, which equates to about $264 million in crypto commissions for the company. That's up from about $11 million in the same period for 2020.

Which cryptocurrencies are people trading most?

eToro has 29 cryptocurrencies available for trade (27 in the U.S.). Five made up the bulk of investor Q2 activity. In terms of trading volume, Bitcoin (BTC) accounted for the most trades. Here's how it breaks down.

In terms of assets under administration, it is Cardano that leads the pack, but only just.

  • Cardano: 23%
  • Bitcoin: 22%
  • Ethereum: 19%
  • Ripple: 14%
  • Dogecoin: 4%
  • Others: 18%

And if we look at total commissions, the picture changes somewhat.

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  • Ripple: 16%
  • Cardano: 15%
  • Ethereum: 14%
  • Doge: 11%
  • Bitcoin: 7%
  • Others: 37%

What we can draw from these numbers

The figures suggest that eToro users may buy and hold Cardano more than the other cryptocurrencies -- it doesn't account for as many trades, but it does top the list for total assets under administration. eToro recently allowed crypto traders to stake ETH, ADA, and TRX (Tron), which could be a factor here.

It's also interesting that Ripple features so prominently on the list. Ripple is a well-known cryptocurrency that aims to facilitate faster and smoother international payments. Unfortunately, it is in the process of a legal battle with the SEC, which says it should have been listed as a security, not a cryptocurrency.

Many cryptocurrency exchanges, including eToro, stopped trading XRP in the U.S. because of the lawsuit. This means that the high volume of Ripple trades and commissions come from non-U.S. customers.

Unlike with Robinhood, which said Dogecoin accounted for about a third of its Q1 trading revenue, DOGE represents a relatively small percentage of eToro's commissions. This could be in part because DOGE was only added to the platform in May.

Why most of your crypto holdings should be in major currencies

Cryptocurrency investing can be rewarding, but it can also be risky. Not only are cryptocurrencies highly volatile, but there's also a danger that coins could fail and the value could fall to nothing.

Smaller cryptocurrencies carry more risks, though they are also more tempting because they can generate much higher returns. The challenge is that there are over 11,000 digital currencies on the market. And unfortunately, a number of them are scams, and others don't have business plans or solid foundations. It's very difficult to pick out the gems -- especially in an unpredictable market where an unexpected celebrity endorsement can send a price soaring.

That's why it makes sense to keep around 70% to 80% of your crypto portfolio in established cryptocurrencies like Bitcoin, Ethereum, or Cardano. Crypto investments are risky enough without going all-in on the even riskier side of the market. It is good to see that 82% of eToro's assets under administration are in the top ten cryptos by market capitalization.

It's also why you should only invest money you can afford to lose -- and make sure crypto accounts for a relatively small percentage of your overall investment portfolio. You don't want to find you don't have enough money when you retire because you overstretched on crypto investments that went on to fail.

Cryptocurrency investment is booming, and there are many opportunities in this space. If you want to join the millions of eToro customers who've already made the leap, just make sure you're clear on how it fits into your overall investment strategy.

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