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DAI Circulation Approaches 5 Billion As MakerDAO Unleashes Key Updates

In a recent announcement on the social media platform X (formerly Twitter), MakerDAO, the Ethereum-based protocol responsible for issuing the DAI algorithmic stablecoin, provided insights into the performance of the Maker Protocol following recent changes.

Over the past few weeks, MakerDAO has implemented significant updates to the protocol and the DAI stablecoin. 

Introducing the Accelerated Proposal and the direct deposit module (D3M) to Spark’s Metamorpho Vault has notably impacted the ecosystem.

Increased DAI Supply And Demand

Looking at key metrics that demonstrate the effects of these changes to the protocol, the DAI supply in circulation currently stands at nearly 5 billion, reflecting a growth of approximately 300 million over the past month. This growth indicates continued demand for the stablecoin. 

On the other hand, the Dai Savings Rate has significantly increased since implementing the Accelerated Proposal. 

Approximately 1.54 billion DAI are currently deposited in the Dai Savings Rate, of which approximately 976 million DAI are sDAI, representing an increase of roughly 400 million DAI in deposits.

The Maker Protocol’s total value locked (TVL) amounts to approximately $8.4 billion across various vault types. This TVL growth can be attributed to strategic deployments in D3M modules, significant contributions from Ethereum-based collaterals, and the integration of real-world assets. These developments have enhanced the protocol’s diversification and resilience.

MakerDAO Ethereum Vaults Thrive

A notable addition to the MakerDAO ecosystem is the Morpho DM3, which enables the Morpho Vault to mint DAI. Currently, the lending pool has deployed 200 million DAI.

According to the protocol’s post, this allocation is projected to generate approximately 50 million in annual income for the Maker Protocol, making it the second-largest core vault in terms of annualized fees. It will play a significant role in generating revenue and contributing to the Maker Protocol’s sustainability.

Among the Ethereum vault types within the MakerDAO ecosystem, the ETH-C vault stands out with the largest value locked in crypto collateral at approximately $1.88 billion. 

This vault generates approximately $43 million in annual fees, underscoring its importance within the Maker ecosystem and contribution to the protocol’s revenue streams.

Another important component is the Spark D3M, which is supplied with around 970 million DAI. This module is projected to generate an annual income of approximately 28 million. 

These recent changes have positively impacted the Maker Protocol. The increase in DAI supply, growth in the Dai Savings Rate, expansion of collaterals, and introduction of different vault types have contributed to the protocol’s growth and development. 

MakerDAO

Despite the growth in the MakerDAO ecosystem, the native token MKR has experienced a continuous 5.9% price decline over the past fourteen days. 

In the last seven days alone, the token has recorded a significant 17% price drop, resulting in its current trading price of $3,355.

However, despite the price decline, Token Terminal data reveals positive trends. The protocol’s market capitalization currently stands at $3.3 billion, reflecting a notable 28% increase over the past 30 days. 

Additionally, trading volume for the MKR token has experienced a substantial surge, reaching $5.9 billion, representing a 119% increase over the same time frame.

Featured image from Shutterstock, chart from TradingView.com 

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Whales, Fresh Wallets Accumulating, Maker (MKR) Spikes 120% In 3 Months

On-chain data reveals that whales and new wallets are scooping more Maker (MKR), which seems to be propping the token, fanning demand. As of September, MKR is one of the top-performing tokens, adding roughly 120% in three months from June 2023 lows.

When writing, MKR is changing hands above $1,300 and inching closer to July 2023 highs. Notably, MKR is up 14% in the past week of trading, driving market cap above $1.27 billion and trading volume by 36% on the last day.

Fresh wallet buying more MKR

Whales And Fresh Wallets Buying Maker (MKR)

Trackers note that in the last week of trading, a whale, “0xad0”, bought 1261 MKR worth $1.62 million at an average price of $1,290. Moreover, looking at the trends, whale and fresh wallet activities have been heightened over the previous week. With more accumulation, the token has been tracking higher in tandem.

Maker price on September 20: Source: MKRUSDT on Binance, TradingView

Parallel data from Lookonchain confirms this development, especially from early September. Earlier this month, a whale sold $1.13 million of Ethereum and bought an equal amount in MKR on Binance.

This transaction comes a day after another entity moved $12.3 million of MKR from Binance. However, while whales appear to be loading up more MKR, Vitalik Buterin, the co-founder of Ethereum, sold his stash of MKR for ETH on September 2. 

Maker Finance is a decentralized lending and borrowing platform on Ethereum. As of September 20, the protocol had a total value locked (TVL) of over $4.8 billion, according to DeFiLlama. More data shows that the platform held $109.56 million of MKR, its native token, and different stablecoins worth $49.58 million. 

Maker Finance TVL DeFiLlama

DAI Yield Rising, New Burning Structure Implemented Fueling Bulls

MakerDAO, a decentralized autonomous organization (DAO), manages DAI, an algorithmic stablecoin that passes yield to the holder. Holders of MKR, the native token of Maker, can also vote on proposals.

Following the brief USDC depegging in March 2023, the DAO reduced its reliance on the USDC, a centralized fiat-backed stablecoin. In early August, the community also voted to temporarily increase the DAI Savings Rate (DSR) from 3.19% to 8%, incentivizing users to mint DAI via the Spark Protocol. 

Besides changes to the DSR, MakerDAO also introduced an improved smart burn mechanism where collateralized debt positions (CDPs) to back circulating DAI can be closed freely without causing stablecoin shortages in the market. In this new arrangement, circulating MKR would be bought and burned independent of CDP closure, allowing the protocol to be more flexible in light of market changes.

However, with this, every burning reduced circulating supply, which has supported prices as price action revealed.

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Report Reveals The Stablecoins That Have Suffered The Most De-Peg Events

Amidst the constant price swings and uncertainties that plague the crypto market, stablecoins have become an invaluable asset for investors and traders. However, analysts have revealed several stablecoins that have been struggling to maintain the esteemed stability reserved for these types of assets.

Stablecoins Under Pressure

The inherent volatility of the crypto market and the persistent price fluctuations of cryptocurrencies are a constant experience in the crypto industry. Due to this, stablecoins like USDT, USDC, and DAI have long been revered as a reliable bridge between the volatility and instability of cryptocurrencies. 

However, a recent report has raised concerns about the stability of some of the most popular stablecoins. The report saw analysts from S&P Global explore the top five stablecoins including Tether (USDT), Dai (DAI) Binance USD (BUSD), USD Coin (USDC), and Paxos (USDP).  

The research paper from Dr. Cristina Polizy, Anoop Garg, and Miguel de la Mata revealed that USDC and DAI have failed to maintain their dollar peg multiple times in the last two years, as compared to other stablecoins like USDT and BUSD. 

The analysis revealed that the de-pegging events for USDC and DAI have taken place more often than those of USDT and BUSD. Circle’s USDC was named as the stablecoin with the most prolonged de-pegging event, dropping to $0.90 for 23 minutes while DAI de-pegged for 20 minutes. 

Stablecoins

In contrast, USDT dropped below the one-dollar peg for just one minute, while BUSD has not experienced any de-pegging event since June 2021 and June 2023. 

Possible Instigations For Stablecoin De-pegging Events

March 2023 saw the fall of three prominent banks in the United States, including Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank. Due to the affiliations of these banks with the crypto industry, their collapse had a significant impact on the prices of digital assets in the space.

Circle’s USDC experienced a decline of 13% below the one-dollar mark after reports revealed that a significant portion of Circle’s cash reserves, adding up to $3.3 billion, were kept in Silicon Valley Bank (SVB). However, the stablecoin has since recovered and maintained its peg following an announcement that confirmed that the Federal Reserve would endorse the banks’ creditors. 

Subsequently, Michael Barr, a high-ranking official at the United States Federal Reserve raised concerns about the adoption rate of unregulated stablecoins like USDT and USDC, which are currently the top stablecoins by market capitalization. 

As the broader crypto market watches closely for more discrepancies in the stablecoin dollar peg, financial firms like PayPal, have launched their own stablecoins. 

Prominent platforms like Binance, and Huobi are already incorporating the new PYUSD into their crypto portfolio. In addition, monetary institutions like Visa are taking advantage of stablecoins like USDC to propel expansion into new markets.

USDC Stablecoins market cap chart from Tradingview.com

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No Vitalik, No Problem: Whale Sells Ethereum (ETH) For Maker (MKR)

Less than a week after Vitalik Buterin, one of the co-founders of Ethereum, sold his Maker (MKR) stash for ETH, one crypto whale has done the opposite. On-chain data on September 4 shows that one Ethereum holder sold 694 ETH, worth roughly $1.13 million when writing, for 1,010 MKR. At the time of the swap, MKR was changing hands at $1,122. 

Whale Swaps ETH For MKR

As of September 4, the address, “0x3737,” had over $20.37 million worth of assets. While the whale trades against Vitalik and doubles down on MKR, zooming in on the address’s portfolio shows that the largest holding is ETH. 

Whale's portfolio: DeBank

The address holds 10,000 ETH worth $16.3 million at spot rates, representing over 75% of the total portfolio. Meanwhile, some of his other major holdings include Arbitrum (ARB), worth $2.9 million, and MKR, worth $1.1 million. 

MKR, the token issued by MakerDAO, the decentralized autonomous organization (DAO) that controls the minting of DAI, a stablecoin on Ethereum, has been ripping higher in the last few months. 

MKR plays a key role in stabilizing DAO and is used as a last resort. Holders participate in governance, voting on proposals that best stabilize the algorithmic stablecoin, deciding collateral types accepted, stability fee adjustments, and others.

From June, MKR has more than doubled, rising 125% to peak at around $1,300 in early August. It is now trading at over $1,100, up 13% from August lows.

Maker price on September 4: Source: MKRUSDT on Binance, TradingView

Maker Presents Endgame

The token’s surge has been attributed to multiple factors, specifically the release of the “Endgame” roadmap. Under this plan, MakerDAO plans to, among other things, release their blockchain, rebrand, and introduce two more tokens. 

This move is significant because MakerDAO is among the first decentralized finance (DeFi) protocols. According to DeFiLlama data, the protocol has a total value locked (TVL) of over $5 billion. It is the largest decentralized money market in the world. 

MakerDAO TVL: DeFiLlama

Meanwhile, DAI, its algorithmic yield-earning stablecoin, has been stable recently and is the largest in Ethereum. At press time, DAI had a market cap of $5.3 billion, perched at 12th on the leaderboard. At this pace, DAI is the third-largest stablecoin after USDT and USDC.

Vitalik Buterin, despite the stellar performance of MKR relative to the broader crypto market, liquidated $580,000 worth of MKR after MakerDAO’s co-founder, Rune Christensen, said it was considering launching a new blockchain bridging to Ethereum that’s based on Solana’s code. The new blockchain, dubbed NewChain, is part of MakerDAO’s roadmap, “Endgame”.

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MakerDAO Debates New EDSR Optimization Plan As MKR Bears Retain Market Control

MakerDAO has been in the headlines recently following a boost in the maximum Dai Savings Rate (DSR) from 3.19% to 8% on Sunday, August 6. This temporary increment termed the Enhanced Dai Savings Rate (EDSR), was designed to encourage more Dai (Maker’s stablecoin) holders to deposit their tokens on the Maker protocol and earn interest.

Following the implementation of EDSR, the Dai token has experienced some traction, with its market cap rising by over $570 million since Sunday, according to data from CoinMarketCap. 

In addition, data from the Makerburn dashboard shows the number of DAI in the DSR program has surged, moving 396.8 million on August 6 to its current value of 906.7 million. 

However, amidst the massive success of the EDSR, MakerDAO co-founder Christen Rune has proposed to adjust this incentive plan “based on observed data.” 

MakerDAO Co-Founder Proposes EDSR Optimization Plan To Curb ETH Whale Dominance 

On August 8, Rune submitted a governance proposal on the MakerDAO forum to optimize the Enhanced Dai Savings Rate citing an ongoing ETH whale dominance over regular Dai holders in terms of the program’s benefits. 

Related Reading: Maker (MKR) Signals Bullish Price Formation – Is $1.300 Around The Corner?

According to Rune, offering yields on Dai that are higher than the cost of borrowing Dai has led to certain borrowing activity known as “borrow arbitrage,” whereby traders borrow Dai at 3.19% and deposit in the EDSR program for 8% profit.

Rune noted that this was not the intended purpose of the EDSR plan. He stated that this investment strategy was mainly practiced by ETH and staked ETH whales, who now receive a higher yield at the expense of regular Dai holders,  the primary target of the EDSR program.

To counter this unforeseen circumstance, Christen Rune proposed to reduce the maximum EDSR interest rate from 8% to 5%. Furthermore, the MakerDAO cofounder proposes an increment in the DAI borrowing rate to be equivalent to the EDSR rate at a minimum of 5%, thus halting the ongoing large-scale “borrow arbitrage” activities.

The proposal also states that MakerDAO should extend Tier 1 EDSR to cover a utilization range of 0-40% and introduce a Tier 2 EDSR for utilization between 40-55% with the aim of making the EDSR plan sustainable. 

For context, utilization refers to the portion of the total capacity of the EDSR system that is in use. Currently, data from Makerburn states that the EDSR has an 18% utilization rate. 

Originally, the EDSR maximum yield was meant to drop to 5.8% once utilization surged to 20%, albeit that would not occur upon approval of Rune’s latest proposal. 

Maker (MKR) Maintains Bearish Form Amidst ESDR Success

In other news, MKR, the native token of the MakerDAO lending protocol, has seen its market price fall in recent days despite the massive boost in DAI’s market shares. 

According to data from CoinMarketCap, MKR’s price is down by 0.84% in the last 24 hours. This price drop adds to the token’s prolonged bearish state, whereby it has lost over 8.26% of its market value in the last seven days. 

Related Reading: Record-Breaking $10 Billion Open Interest Fuels Bullish Speculation For Bitcoin Reversal

During this period, MKR’s price declined from $1,339.22 on Aug.3 to as low as $1,187.66 on Aug.7. However, most MKR investors still likely retain faith in the DeFi token, which boasts of a positive monthly performance gaining by 32.30% in the last 30 days.

At the time of writing, MKR is trading at $1,214.28, with a 0.39% loss in the last hour. With a market cap of $1.18 billion, the token is ranked as the 42nd largest cryptocurrency in the market.

MakerDAO

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Maker (MKR) Signals Bullish Price Formation – Is $1.300 Around The Corner?

Maker (MKR), one of the prominent players in the decentralized finance (DeFi) space, has experienced a remarkable 11% price surge in the past seven days. Despite a slight drop in the last hour, the token’s performance remains impressive. 

Maker (MKR) Bullish Price Sentiment

Maker’s recent price performance has been noteworthy, with a solid 11% increase over the past week. The token also recorded a 4.21% price increase in the last 24 hours, indicating strong momentum in the short term. However, a minor correction of 0.81% in the past hour highlights the market’s volatility.

Currently trading at $1,220.43 per MKR, the token remains 80.75% below its all-time high of $6,339.02. While the recent price surge is encouraging, it is essential to consider the historical context and the factors influencing the crypto market’s dynamics.

Maker (MKR) is up 11% in the past week: Source @Tradingview

The MakerDAO community recently voted in favor of a temporary increase to the interest rate paid to holders of the protocol’s decentralized stablecoin, DAI. This proposal introduced the Enhanced Dai Savings Rate (EDSR), a mechanism to temporarily boost the Dai Savings Rate (DSR) to users during periods of low utilization.

Proposed by Maker founder Rune Christensen, the EDSR could increase the effective DSR to 8% when the utilization ranges from 0% to 20%. The mechanism is designed to decrease the DSR as utilization increases gradually.

Related Reading: Shiba Inu Reclaims 14th Spot In Market After 5% Jump

This isn’t the first time Maker has adjusted the DSR. In the past few months, the protocol has raised the DSR thrice: first to 1% in November, then to 3.3% in May, and finally incorporating a marginal increase to 3.49% in June. The latest EDSR proposal aims to incentivize DAI holders and stimulate demand for the stablecoin.

Stimulating Demand For DAI

Despite the recent increase in the DSR, data from Dai Stats shows that investors have only deposited $307 million in the DSR, representing a modest 6.7% of the total supply of DAI. The amount of DAI in circulation decreased to $4.6 billion from over $6.9 billion in the previous year.

In response to the declining circulation of Maker’s dollar-pegged stablecoin, the protocol is taking proactive steps to spur demand for DAI. By enhancing the interest rate DAI holders can earn, the protocol aims to attract more users and create a favorable ecosystem for DAI utilization.

Related Reading: Tether (USDT) Market Cap Reaches New Peak, Edges Toward $84 Billion Mark

The broader stablecoin market has also experienced a downtrend, with the total market capitalization sinking to $127 billion from nearly $160 billion a year ago. The introduction of EDSR is seen as a strategic move to increase the appeal of DAI and strengthen its position in the competitive stablecoin landscape.

What’s Next For Maker (MKR)?

As Maker continues improving the DAI ecosystem, investors closely monitor its governance decisions and the market’s response to the enhanced interest rate mechanism. The success of the EDSR proposal could drive further adoption of DAI and contribute to its overall liquidity in the market.

Moreover, the broader crypto market’s performance and regulatory developments will determine Maker’s future trajectory. If the bullish sentiments continue, Maker could surpass the $1,300 resistance point but if the opposite occurs the next support levels are $1,200 and $1,180. 

(This site’s content should not be construed as investment advice. Investing involves risk. When you invest, your capital is subject to risk).

Featured image from iStock, chart from TradingView