The AEUR stablecoin price recently recorded a 300% surge on cryptocurrency exchange platform Binance. Designed to be aligned with the value of the euro, AEUR has undergone an unexpected surge. We take a look at the causes and consequences of this phenomenon, as well as Binance’s responses to this unprecedented situation.
The AEUR euro stablecoin depeg
The AEUR stablecoin, issued by Swiss company Anchored Coins, was intended to reflect the value of the euro. However, shortly after its launch on Binance, its price unexpectedly rose by 300%, peaking at $3.25 against an expected value of around $1.07.
This significant fluctuation could be explained by a misunderstanding on the part of some Binance traders as to the very nature of AEUR as a stablecoin. Usually, cryptocurrency investors are accustomed to dollar-denominated stablecoins, identifiable by the initials USD in their name. This probably led to confusion, leading them to believe that AEUR was a new crypto.
Chart of AEUR against the dollar
In a bid to capitalize on the early liquidity brought by new token listings on Binance, many investors are buying it with the simple aim of reselling it a few minutes later. Typically, these new tokens initially experience a sharp rise, followed by a fall caused by profit selling by Binance users or outside players who already owned the token.
Binance had also introduced a no-fee promotion for trading this stablecoin. This offer, combined with strong listing speculation and limited liquidity, created the perfect conditions for an explosive cocktail, resulting in a trading volume of almost $34 million.
Faced with this exceptional situation, Binance subsequently decided to suspend trading in the stablecoin AEUR.
Binance decides to compensate users
Following the suspension of AEUR trading, Binance has announced its intention to compensate traders who acquired AEUR stablecoin at a higher-than-normal price.
The compensation concerns only transactions made between 12:41pm and 1:31pm on Tuesday, December 5, 2023, provided that the AEUR purchased has not been resold on the platform. Clearing is expected to take place over the next few days, although the total amount has not been disclosed by the exchange.
In order to protect you, our users, Binance suspended trading for $AEUR on December 5 due to abnormal volatility.
Within 72 hours of this announcement, Binance will facilitate and implement the AEUR project team’s compensation plan for impacted users.https://t.co/P0ygcDYBNK
– Binance (@binance) December 6, 2023
As a reminder, AEUR is issued by Anchored Coins, a company based in Zug, Switzerland, validated by the Swiss Financial Market Supervisory Authority (FINMA). According to Anchored Coins, each AEUR unit is backed in a 1:1 ratio by reserves held exclusively in Swiss banking institutions accredited by FINMA. Currently, the company’s stablecoins are issued on the Ethereum and BNB Smart Chain networks.
