MakerDAO Price Rebounds as DAI Holds its Peg and Investors Seek Stablecoin Safety

MakerDAO Price Rebounds as DAI Holds its Peg and Investors Seek Stablecoin Safety

It’s been a rough couple of weeks for the cryptocurrency market. The price of Bitcoin (BTC) is nowhere near most analysts’ price estimates, several stablecoins lost their parity, and the demise of a major decentralized finance (DeFi) platform sparked an event that resulted in its demise. $900 billion of the total crypto market capitalization. .

Amid the widespread fallout, MakerDAO (MKR) managed to turn crisis into opportunity and the collapse of TerraUSD (UST) has renewed attention on DAI, the longest running decentralized stablecoin.

Data from Cointelegraph Markets Pro and TradingView shows that As the price of Terra (LUNA) crash accelerated from May 9 to May 12, the MKR token surged 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 momentum reversal include that DAI maintained its peg during the recent market turmoil, the use of a MakerDAO vault to fund supply chain shipments, and the addition of staked Ether (ETH) as a form of collateral to mint DAI.

DAI remains stable during strong market turmoil

One of the most significant factors that give investors more confidence in the MakerDAO ecosystem is the fact that DAI maintained its peg to the dollar during an unstable market in which a handful of the most popular stablecoins lost their peg.

During the height of volatility, DAI price ranged from a low of $0.9961 on May 11 to a high of $1.0046 on May 12 and is currently priced at USD 0.9994.

DAI holding steady despite a supply decline of more than 2.2 billion coins may have given investors more confidence, especially after Tether (USDT) briefly saw its price hit a low of $0.9704.

Read:  Spotify meets with investors, before 'Netflix storm'

Real-world adoption continues

Another factor driving MKR is its growing adoption in the real world. The MakerDAO vault was recently used to finance a shipment of Australian beef and additional “use cases” are being planned.

On May 9, a MakerDAO vault was used in conjunction with decentralized finance protocol Centrifuge to allow trade finance provider ConsolFreight to mint DAI that was used to fund the transaction.

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

This transaction helped demonstrate an application of smart contracts and stablecoins in the supply chain industry.

Ether staked as collateral

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

MakerDAO Price Rebounds as DAI Holds its Peg and Investors Seek Stablecoin Safety

sETH2 allows those who participate in staking on the Ethereum Beacon Chain to gain access to funds that would otherwise be locked up for an unknown period of time and put them to use for a return in DeFi.

The collapse of UST, its fallout, and the addition of Ether as collateral position MakerDAO as the top-ranked DeFi protocol by Total Value Locked (TVL) according to Defi Llama data.

MakerDAO Price Rebounds as DAI Holds its Peg and Investors Seek Stablecoin Safety
Top 5 protocols by total value locked. Source: Defi Llama

MakerDAO claims that the top spot comes after Curve, another popular stablecoin liquidity protocol, saw its TVL drop from $19.32 billion on May 5 to $8.71 billion on May 16.

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

Keep reading:

Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.