MakerDAO price rebounds as DAI holds its peg and investors search for stablecoin security

MakerDAO price rebounds as DAI holds its peg and investors search for stablecoin security

It has been a rough few weeks for the cryptocurrency market. The price of Bitcoin (BTC) is nowhere near the price estimates of most analysts, multiple stablecoins have lost their pegs, and the demise of one of the top decentralized finance (DeFi) platforms has sparked an event that saw $900 billion siphoned from the cryptocurrency disappeared from the total market capitalization.

Amid widespread repercussions, MakerDAO (MKR) managed to turn a crisis into an opportunity, while the debacle of TerraUSD (UST) brought renewed attention to DAI, the longest-running decentralized stablecoin.

Data from Cointelegraph Markets Pro and TradingView shows that MKR rose 66.2% from a low of $952 on May 12 to its current price of $1,587 as Terra (LUNA) price accelerated from May 9 to May 12.

MKR/USDT 1-day chart. Source: TradingView

Three possible reasons for MKR’s reversal of momentum include DAI maintaining its peg during the recent market turmoil, using the MakerDAO vault to fund supply chain shipping, and adding pledged ether (ETH) as a form of collateral to mint DAI.


DAI holds steady amid strong market turmoil

One of the most important factors giving investors more confidence in the MakerDAO ecosystem is the fact that DAI has maintained its peg to the US dollar in a volatile market, with some of the most popular stablecoins losing their peg.

The price of DAI fluctuated from a low of $0.9961 on May 11 to a high of $1.0046 on May 12 during the period of intense volatility, and is currently trading at $0.9994.

DAI has held steady despite the over 2.2 billion DAI supply reduction, which may give investors more confidence, especially after Tether (USDT) briefly touched a low of $0.9704.

Real-world adoption continues

Another factor driving MKR is its growing popularity in the real world. Most recently, the MakerDAO vault was used to fund the shipment of Australian beef, and other “use cases” are being planned.

On May 9, the MakerDAO vault was combined with decentralized asset financing protocol Centrifuge to allow trade finance provider ConsolFreight to mint DAI used to finance transactions.

A non-fungible token (NFT) containing shipment and invoice data was also minted in the process for tracking purposes and to help keep transaction records. The shipment is also being tracked using Provenance, Mastercard’s blockchain traceability solution.

The deal helps demonstrate one application of smart contracts and stablecoins in the supply chain industry.

Staking Ether as collateral

Another factor powering MakerDAO is the addition of support for staking Ether as a form of protocol collateral.

sETH2 allows those who participate in staking on the Ethereum BNB chain to obtain funds that would otherwise be locked for an unknown period of time and use them to earn yields in DeFi.

The collapse of UST, its knock-on effects, and the addition of ether as collateral have made MakerDAO the top DeFi protocol by total value locked (TVL), according to Defi Llama.

Top 5 protocols locked by total value. Source: Defi Llama

MakerDAO took the top spot after the TVL of Curve, another popular stablecoin liquidity protocol, fell from $19.32 billion on May 5 to $8.71 billion on May 16.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Every investment and trading move involves risk and you should do your own research when making a decision.

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