MakerDAO returned to prominence after Terra’s UST collapse forced investors to search for a truly “stable” dollar pegged asset.
Its been a rough couple of weeks for the cryptocurrency market. Bitcoin (BTC) price is nowhere near the price estimates of most analysts, multiple stablecoins lost their peg and the demise of one of the top decentralized finance (DeFi) platforms sparked an event that resulted in $900 billion vanishing from the total crypto market capitalization.
In the midst of the widespread fallout, MakerDAO (MKR) managed to turn crisis into opportunity and the collapse of TerraUSD (UST) has brought renewed attention to DAI, the longest-running decentralized stablecoin.
Data from Cointelegraph Markets Pro and TradingView shows that as the collapse of Terra (LUNA) price accelerated from May 9 to May 12, MKR climbed 66.2% from a low of $952 on May 12 to its current value of $1,587.
MKR/USDT 1-day chart. Source: TradingView
Three possible reasons for the MKR’s reversal in momentum include DAI maintaining its peg during the recent market turmoil, the use of a MakerDAO vault to finance supply chain shipments and the addition of staked Ether (ETH) as a form of collateral to mint DAI.
DAI holds steady during strong market turbulence
One of the most significant factors giving investors more confidence in the MakerDAO ecosystem is the fact that DAI held its dollar peg during a shaky market that saw a handful of the most popular stablecoins lose their pegs.
Over the past few days DAI demand has violently contracted by 25%, but the peg is still rock solid due to the Peg Stability Modules.
Stacking DAI demand into the PSMs during the bull market gives DAI holders peace of mind during even the roughest of weeks. pic.twitter.com/XGEYndBP05
— hexonaut.eth @ Permissionless (@hexonaut) May 12, 2022
During the height of volatility, the price of DAI oscillated from a low of $0.9961 on May 11 to a high of $1.0046 on May 12 and is currently priced at $0.9994.
DAI holding steady despite a supply decrease of more than 2.2 billion DAI may have given investors more confidence, especially after Tether (USDT) briefly saw its price hit a low of $0.9704.
Real-world adoption continues
Another factor providing a boost to MKR is its growing real world adoption. Recently, the MakerDAO vault was used to finance a shipment of Australian beef and additional “use cases” are being planned.
A Maker Vault was used to finance a shipment of Australian Beef from Brisbane to Hong Kong.
On top of that, the entire operation is currently being tracked using @Mastercard Provenance, a blockchain traceability solution.
This is how it was possible
— Maker (@MakerDAO) May 10, 2022
On May 9, a MakerDAO vault was utilized in conjunction with the decentralized asset financing protocol Centrifuge to allow the trade finance provider ConsolFreight to mint DAI that was used to finance the transaction.
A nonfungible token (NFT) that contained the shipment and invoice data was also minted in the process for tracking purposes and to help keep a record of the transaction. The shipment is also being tracked using Provenance, Mastercard’s blockchain traceability solution.
This transaction helped to demonstrate one application of smart contracts and stablecoins in the supply chain industry.
Staked Ether as collateral
Another factor building momentum for MakerDAO is the addition of support for staked Ether as a form of collateral on the protocol.
sETH2 allows those participating in staking on the Ethereum BNB Chain to gain access to funds that would be otherwise locked up for an unknown amount of time and put them to use earning a yield in DeFi.
The collapse of UST, its knock-on effects and the addition of Ether as collateral positions MakerDAO as the top-ranked DeFi protocol by total value locked (TVL), according to data from Defi Llama.
Top-5 protocols by total value locked. Source: Defi Llama
MakerDAO claiming the top spot comes after Curve, another popular stablecoin liquidity protocol, saw its TVL fall from $19.32 billion on May 5 to $8.71 billion on May 16.
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