Over the past year, the euro has been declining significantly. The Euro and the US dollar reached parity on July 13 for the first time since 2002.

The Euro is weak for two reasons. First, there is no end in sight to Europe's rising inflation. Second, the US dollar is the preferred safe haven asset to hold in times of uncertainty. Investors are turning to the US dollar for safety since both stocks and bonds have lost value so far this year.

The US dollar's strength as well as the euro's weakness both contribute to the explanation of the Euro's 1:1 parity with the USD.

Aave allows Euro Stablecoins to be deposited on it’s platform. Jarvis Euros (jEUR), Statis Euros (EURS) and agEUR can be used in Aave V3 on Polygon.

The bar chart below shows daily new deposits and loans of all types of Euro stablecoins on Aave V3 Polygon.

Euro stablecoins deposits have a high utilisation rate. The volumes of deposits and borrows are similar, indicating that user’s deposits is being put to work as loans to borrowers.

Notice the unusually high volume of new loans on July 11th, right before the Euro reached parity with the US dollar. After this event, the daily volume of new loans decreased for a few days.

It is important to keep in mind that this is still a small market. Daily new loans of Euros on Aave Polygon rarely exceed 100,000 Euros. This accentuates the daily volatility observed in the data.

Limitation: the chart does not show withdrawals of deposits or repayments of loans. It should not be interpreted as a net balance sheet. The chart shows the sum of daily new deposits and new loans for all types of Euro stablecoins on Aave Polygon.

Aave Polygon sees more loan transactions than deposits for its Euro stablecoins. This means that the average deposit amount is higher than the average loan amount.

On the day before the Euro fell to parity with the USD, a record number of 54 daily new loans were issued on Aave Polygon.

Takeaways

• Three Euro stablecoins are hosted on Aave V3 Polygon. Users have the option of lending or borrowing euros through the Aave protocol (and earning yield).
• New loans and deposits are generally equal in volume.
• Individual loan transactions outnumber individual deposit transactions. As a result, the average loan is smaller than the average deposit.

On July 13, the Euro fell to parity with the US dollar for the first time since 2002. The volume and number of Euro loans on Aave were especially high just before this day. This could indicate a change in investor behaviour. The Aave Polygon Euro market is still small, thus it is challenging to make inferences from the very erratic transaction volumes.

Technical notes:

1. All writing and queries are my own.

2. Data is pulled from Flipside’s polygon.core.fact_token_transfers

3. Aave V3 Polygon has three Euro coins. The data above is the aggregate of all three coins.

   
   By taking into account repayments and withdrawals, further research could show the daily net balance sheet of all Euro deposits and loans on Aave Polygon. EURS stablecoins are also available on Aave Arbitrum.