Binance suspends trading of stablecoin after it exceeds $3

The price of stablecoin AEUR recently registered a 300% increase on the cryptocurrency exchange Binance. Designed to be in line with the value of the Euro, the AEUR suffered an unexpected rise. We take stock of the causes and consequences of this phenomenon, as well as the responses that Binance has given to this unprecedented situation.

The pegging of the euro stablecoin AEUR

Stablecoin AEUR, issued by the Swiss company Anchored Coins, was intended to reflect the value of the euro. However, shortly after launching on Binance, its price experienced an unexpected 300% increase, peaking at $3.25 against an expected value of about $1.07.

This significant fluctuation can be explained by a misunderstanding on the part of some Binance traders about the very nature of AEUR as a stable coin. Typically, cryptocurrency investors are accustomed to dollar-denominated stablecoins that can be identified by the initials USD in their name. This likely led to confusion, leading them to believe that AEUR was a new crypto.

Graph of AEUR vs Dollar

In order to take advantage of the initial liquidity from the new token listings on Binance, many investors buy it for the simple purpose of selling it again a few minutes later. Generally, these new tokens initially experience a strong rise, followed by a fall caused by the profit selling by Binance users or external actors who already owned the token.

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Binance had also implemented a free campaign for trading this stablecoin. This offering, combined with strong listing speculation and limited liquidity, created the perfect conditions for an explosive cocktailwhich led to trading volume reaching almost $34 million.

Faced with this extraordinary situation, Binance subsequently decided to suspend trading of the stablecoin AEUR.

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Binance decides to compensate users

Following the suspension of AEUR trading, Binance announced its intention to compensate traders who acquired stablecoin AEUR at a higher price than usual.

The compensation only relates to transactions carried out between 12:41 and 13:31 on Tuesday 5 December 2023, provided that the AEUR purchased has not been resold on the platform. However, the compensations were to be made in the coming days the total amount has not been disclosed by the stock exchange.

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As a reminder, theAEUR 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 1:1 by reserves held exclusively in FINMA-accredited Swiss banking institutions. Currently, this company’s stablecoins are issued on the Ethereum and BNB Smart Chain networks.

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Source: Binance

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