MakerDAO’s native governance token, MKR, has seen significant growth this week, despite the latest rate hikes from the Federal Reserve. The protocol enables the minting of U.S. dollar-pegged DAI against over-collateralized deposits of other cryptocurrencies, such as Ethereum or Uniswap’s UNI token.
MakerDAO MKR Token Surges Amid Rate Hikes and Protocol’s $1.73B Treasury Bill Stash
The U.S. Federal Reserve increased rates again on Wednesday in an ongoing effort to combat inflation. This latest 25-basis-point hike brings the federal funds rate to a range of 5.25% to 5.50%.
MKR’s Price Rise Amid Federal Rate Hikes
Around the same time, MKR jumped from $1,119 on Wednesday to $1,266 on Thursday, marking a substantial 13% rise. As of now, it has shed some of those gains and is trading at $1,167.
The increase in MKR’s price is attributed to several factors, including the protocol’s recent onboarding of Treasury Bills. Daistats, a platform monitoring the types of assets in the protocol, indicates there are $1.732 billion in T-Bills on Maker.
As part of its “Endgame Plan,” the protocol has been diversifying its treasury by onboarding so-called real-world assets. With rising rates, this stash is generating significant revenue for Maker.
MakerDAO Buyback Program and Revenue Uptick
Last year, MakerDAO began converting its stablecoin deposits to yield-generating traditional financial assets, including U.S. Treasury bills and loans to institutions, thereby adding to its portfolio of real-world assets (RWA). The percentage of RWA assets, mainly comprising U.S. T-bills, for DAI collateralization has increased from 23.3% at the end of May to 35.1% by July 27.
RWA assets are also the leading revenue generators for the protocol, accounting for 54% of its total revenue. The revenues come from the fees for minting DAI and yields on collateral such as U.S. T-bills. The increase in Maker’s exposure to U.S. T-bills and the Fed’s rate hike have together helped increase the yield on DAI, and subsequently, the protocol’s revenue.
The MakerDAO community recently implemented a Maker Burn Engine program on July 18 to buy back a portion of the MakerDAO’s surplus revenue to increase MKR’s liquidity across various decentralized exchanges and burn a portion of it.
Since the code’s execution, the projected amount of MKR buyback has increased by 1,622 MKR worth $2 million in less than ten days. This higher degree of MKR burns after the tokenomics change is contributing significantly to MKR’s price surge.
Smart Money Accumulating MKR
Nansen’s supply distribution data for MKR tokens reveals that “smart money” wallets have been aggressively accumulating MKR since the start of the year. The crypto analytics firm tags wealthy and most profitable addresses as “smart money.” While the total supply held by these wallets dropped slightly over the last few days, the number of smart money wallets holding MKR continues to rise.
As of the latest data, the price of MKR is $1,167. The recent developments and strategic moves by MakerDAO have made it a token to watch in the current market scenario.
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