DeFi giant MakerDAO has lent $1.8 million of DAI stablecoin to the tokenized credit pool under distress.
DAI Stablecoin Surpasses $5B Market Cap on Higher Yield, Lifting Spark Protocol
The recently-introduced Enhanced Dai Savings Rate reversed some of the token’s decline in market value.
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.
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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.
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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.
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Weeks of Prosperity: MKR Holders See Wealth Grow By Over 100% Amidst Price Boom
MakerDAO (MKR) has navigated a tumultuous path in the Decentralized Finance (DeFi) market since June, marked by regulatory pressures and various challenges numerous projects face. Nonetheless, a shift in focus has occurred as altcoins, spearheaded by MKR, appear to overshadow this turbulence.
Presently, the value of MKR on CoinGecko stands at $1,346, showing a noteworthy 9.1% surge within the past 24 hours, accompanied by an impressive week-long ascent of 18.0%.
From mid-June, MKR has achieved an increase exceeding 115%. This growth has effectively diminished the proportion of investors encountering losses by a significant margin of 26%.
MKR Price Report Reveals Sustained Accumulation, Whale Activity
MKR has emerged as a notable hotbed of investor interest, with a recent price report shedding light on intriguing market dynamics. The journey of MKR’s price has been marked by a distinct trend of accumulation (see chart below) that has been underway since March, underscoring the growing interest and confidence among investors.
As the calendar flipped to June, the accumulation of MKR gained considerable traction. Notably, this month saw a strategic move by prominent investors, often called “whales,” who opted to divest a portion of their holdings.
This strategic decision, seemingly aimed at capitalizing on profits, had the unintended consequence of temporarily affecting the supply.
However, the cryptocurrency market is known for its intricate interplays, and MKR’s case was no exception. While whales reduced their holdings, more oversized wallet holders recognized an opportune moment and swiftly absorbed the newly available supply. This orchestrated shift in ownership demonstrated the agility and resilience of the MKR ecosystem.
Resurging Interest In DeFi Tokens
DeFi has recently witnessed a fascinating shift in dynamics, drawing attention from analysts and investors. Glassnode’s insightful observations highlight a distinct surge of interest in DeFi tokens sparked by lackluster performances within the ecosystem.
The backdrop against which this resurgence unfolds is crucial to understanding its significance. The previous dip in DeFi token prices was undeniably attributed to a significant event – the release of a memo by the US Securities and Exchange Commission (SEC).
This regulatory communication deemed approximately 68 tokens unregistered securities, casting a shadow of uncertainty over the DeFi landscape.
Amidst the tumultuous landscape, the resurgence of interest is indeed noteworthy. Glassnode’s analytical lens zooms in on this intriguing development, offering valuable insights into the changing sentiment. The data analysis firm aptly captures the essence of this rebound:
“This is the first outperformance since September 2022, with very similar performance thus far.”
This assessment not only underscores the significance of the current uptick but also draws parallels to a prior period, hinting at the potential of a sustained trajectory.
(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 The Coin Republic
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Cryptocurrency giants, bitcoin and ether, meanwhile, lost ground during the month.
MakerDAO increases DAI yield in a bid to boost demand
The Enhanced Dai Savings Rate is based on DSR utilization and could boost the stablecoin yield by as much as 8%.
MakerDAO Looks to Ignite Growth for $4.6B DAI Stablecoin with Up to 8% Reward
The circulation of Maker’s DAI stablecoin has shrunk by a third over the past year.
Paradigm Moves $3.5M in MakerDAO’s MKR Tokens Following Peer a16z’s Maneuver
Paradigm Capital’s transfer follows venture capital firm a16z depositing $7 million of MKR to Coinbase.
Venture Capital Firm a16z Unloads $7M of MKR Tokens as Price Soars
Lending platform Maker’s governance tokens soared to near one-year high prices last week prior to the transactions.
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MakerDAO’s MKR Soars 28% in a Week as Token Buyback Scheme Goes Live
The lending platform is on track to remove some $7 million of MKR governance tokens from the market in a month, according to blockchain data.
MakerDAO Votes to Halt Lending to Tokenized Credit Pool After $2M Loan Default
The embattled Harbour Trade credit pool minted $1.5 million of DAI stablecoin secured with loans to a consumer electronics firm, which defaulted on $2.1 million of debt.
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MakerDAO Boosts U.S. Treasury Holdings by $700M to Back DAI Stablecoin With Real-World Assets
The purchase is the latest step to increase the role of real-world assets in the platform’s DAI stablecoin reserve.
MakerDAO Hikes DAI Savings Rate, Ousts Paxos Dollar, Curbs Gemini Dollar in Reserve
The move could redefine baseline interest rates in the DeFi space, spurring higher stablecoin lending rates and making leverage more expensive, one analyst noted.
MakerDAO Weighs Ditching $390M of Gemini Dollars from DAI Reserve
The result could have a significant impact on Gemini and its stablecoin as MakerDAO’s reserve holds roughly 88% of total GUSD supply.
MakerDAO Paves Way for Additional $1.28B U.S. Treasury Purchase
The protocol’s community voted for onboarding a new real-world asset vault that would invest up to the additional amount in U.S. Treasury bonds.
MakerDAO Votes to Ditch $500M in Paxos Dollar Stablecoin From Reserve Assets
The result is a significant blow for Paxos as MakerDAO currently holds roughly half of USDP’s total supply.
MakerDAO proposal seeks to hike DAI savings rate to 3.33%
The DAI savings rate was previously increased to 1% in December 2022, and led to 35 million DAI being deposited in the span of a month, according to MakerDAO.
