- The DAI stablecoin witnessed a big surge in marketcap.
- MakerDAO’s MKR wasn’t seen to be influenced by surging DAI demand.
The DAI stablecoin not too long ago skilled an enormous surge in its marketcap. Based mostly on the underlying mint and burn mechanism, the surge indicated that the stablecoin has been hit with a powerful demand wave.
Learn Maker’s [MKR] value prediction 2023-24
Assessing the demand for DAI
To place issues into perspective, DAI had a $4.44 billion marketcap as of 5 August. The marketcap determine soared to $5.1 billion 5 days later. This meant that DAI’s marketcap grew by roughly $750 million in only a few days.
The identical stablecoin had beforehand been experiencing liquidity outflows within the final three months.
Supply: Glassnode
So, what’s the purpose behind these observations? The sudden marketcap pivot means DAI’s provide skilled exponential development within the final 5 days. An incentive to mint DAI is the probably purpose for its hovering provide.
Based on latest experiences, MakerDAO’s DAI financial savings fee (DSR) not too long ago pushed as much as 8%.
MakerDAO’s DAI financial savings fee (DSR) rises to eight%, triggering a notable development in provide. Prior to now week, the quantity of DAI incomes DSR climbed by almost $1B, and the DAI provide elevated by $800M, reaching a three-month excessive. #DAI pic.twitter.com/IneytHA2wO
— IntoTheBlock (@intotheblock) August 11, 2023
Now we have to take a look at a number of the mechanics that underpin the MakerDAO ecosystem to know how the DSR was influencing DAI provide. An overcollateralized mint and burn system powers the mechanism.
Customers can deposit the accepted cryptocurrencies as collateral, which is then used to mint DAI. This minted DAI, subsequently, acts as a mortgage issued in opposition to the deposited cryptocurrency.
The motivation behind that is that DAI holders get to earn passive earnings paid out from stability charges collected from collateralized debt positions (CDPs). An 8% DSR represents a wholesome return therefore a powerful incentive to mint extra DAI. However does this translate to extra on-chain exercise?
DAI’s on-chain metrics confirmed that the surge in DAI provide doesn’t essentially recommend a surge in DAI-related transactions. For instance, lively addresses and switch charges have been on an total downward trajectory for the reason that begin of August.
Supply: Glassnode
However, MakerDAO introduced not too long ago that the Spark protocol has been experiencing explosive development. Extra importantly, over 198 million DAI was borrowed on the protocol since its launch in Could.
Spark Protocol launched in Could.
Three months later, it has climbed to the highest 30 DeFi protocols primarily based on complete worth locked.
From 0 to 198 million DAI borrowed — what a leap!
Let’s discover Spark Protocol’s unbelievable development.
— Maker (@MakerDAO) August 10, 2023
Is MKR benefiting from DAI’s hovering provide?
The DAI minting will probably not have an effect on MKR’s value. It is because MKR is used as a governance token and never collateral for the DAI mint and burn mechanism. MKR’s value motion has been total bearish since 2 August. It peaked at $1366 on the identical day, nevertheless it exchanged arms at $1248 at press time.
Supply: TradingView
Is your portfolio inexperienced? Try the MKR Revenue Calculator
Notice that the retracement within the first week of August represents a bullish recess contemplating that MKR was beforehand on a powerful and prolonged rally. Thus, merchants may solely wait and watch which path will MKR head in over the subsequent few days.
