WazirX to compensate users who lost big on volatile meme coin

Cryptocurrency exchange WazirX is introducing a series of measures to placate users who lost money on volatile Shiba Inu (SHIB) trades, which opened at a substantial premium to its current price on the exchange on Friday.

From its peak of Rs 1,660, its price had dipped to below one rupee an hour after the token had listed.

Only one SHIB was bought at the peak price.

Like Dogecoin, Shiba Inu is also a meme coin, which its website says is a “Dogecoin killer.”

Nischal Shetty, founder and CEO of WazirX, said listing the meme token on his exchange -which has a substantial base of novice crypto traders – has turned out to be an expensive lesson.

“Fluctuations are common. People who are into crypto understand this already. In fact, a lot of people trade in the initial hours of listing because they know there will be wild fluctuation,” Shetty said.

Shetty said the company has introduced the “WRX Airdrop” programme for users who bought SHIB at an exceptionally high price and did not sell or sold it after the token’s prices normalised.

Essentially, what this means is that users who were impacted will be given WazirX’s utility token – WRX – equivalent to 25% of their loss every month for the next four months.

“We announced the program because we realised that a lot of people are new to the ecosystem and are still trying to understand how the ecosystem operates,” Shetty, whose platform added over a million new users in April alone, said.

To be clear, WazirX does not determine the price of the token. It is an open order book exchange on which prices are driven by demand and supply.

“Different countries and exchanges will often have price discrepancies. For sophisticated traders, it’s an arbitrage opportunity, but for most people, it can seem confusing and unfair,” said Raj Karkara, chief marketing officer of crypto exchange ZebPay. “We try to only list coins we feel sure will have long-term value, with Bitcoin and Ether being our gold standard.”

WazirX is also making changes to its Rapid Listing programme, through which SHIB listed on Friday.

Rapid listing relies solely on liquidity providers that the exchange ties up with for tokens going live through this method.

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The platform is planning changes to the policy and will now also allow sellers to deposit tokens before allowing trades, in order to ensure more liquidity in the market.

“We are at a stage where relying on liquidity providers won’t work for us at this scale. From now, we will enable deposits and withdrawals of a token. After giving sufficient time for people to bring in the tokens, we will then enable the listing. This will ensure that there’s no liquidity crisis,” Shetty said.

In future, WazirX – owned by Binance, the world’s largest bitcoin exchange in terms of trading volumes — is also planning to warn users about expected volatility for 24 hours on its webpage when a new token is listed.

It will continue to list meme coins if the community demands it, Shetty said.

SHIB had one of the highest openings ever for a token and the exchange had not anticipated this level of demand, he added.

Users took to microblogging platform Twitter to air their concerns about the price volatility and blamed WazirX for SHIB’s price discrepancies.

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Around May 8, the SHIB token saw its trading volumes cross $1 billion, according to Coinmarketcap.com.

On May 10, Mumbai-based crypto CoinDCX enabled a spot market for SHIB pairs for its professional traders on CoinDCX Pro.

“We did not list SHIB on CoinDCX Go, built for new Indians, as it didn’t clear our internal risk framework for new listings,” said Ramalingam Subramanian, chief marketing officer of the exchange.

On Friday, India’s Crypto Covid Relief Fund – founded by Sandeep Nailwal – announced that Vitalik Buterin, the founder of the second most expensive crypto Etherum, had donated 50 trillion SHIB coins to the fund.

WazirX listed the coin on the same day.

According to SHIB’s website, 50% of its total supply was “burned to Buterin”.

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