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

It's been a rough few weeks for the cryptocurrency market. Bitcoin’s price is well below most analysts’ estimates, multiple stablecoins are depegged from the U.S. dollar, and the demise of one of the top decentralized finance (DeFi) platforms sparked a black swan event that wiped 9,000 of the total cryptocurrency market capitalization One hundred million U.S. dollars.

Amid the wide-ranging fallout, MakerDAO (MKR) managed to turn a crisis into an opportunity, while the collapse of TerraUSD (UST) brought DAI, the longest-running decentralized stablecoin, back into the limelight.

Data from Cointelegraph Markets Pro and TradingView shows that as Terra (LUNA) price collapse accelerated from May 9 to May 12, MKR climbed from a low of $952 on May 12 to $1587 at the time of writing, up 66.2%.

KR/USDT 1-day chart source: TradingView

Three possible reasons for MKR’s momentum reversal include: DAI maintaining its peg during the recent market turmoil, using MakerDAO vaults to fund supply chain shipments, and adding ETH as a form of collateral for minting DAI.

DAI Remains Stable Amid Strong Market Turmoil

One of the most important factors that gave investors more confidence in the MakerDAO ecosystem was that DAI maintained its peg to the U.S. dollar during the market turmoil, while some of the most popular stablecoins lost their peg.

At the height of volatility, the price of DAI rose from a low of $0.9961 on May 11 to a high of $1.0046 on May 12.

Despite a supply reduction of more than 2.2 billion, DAI has remained stable, possibly giving investors more confidence, especially after Tether (USDT) prices briefly hit lows of $0.9704.

Real-world adoption continues

Another factor driving the growth of MKR is its increasing adoption in the real world. Recently, a MakerDAO vault was used to finance the shipment of a shipment of Australian beef, and more “use cases” are being planned.

On May 9, transaction finance provider ConsolFreight minted DAI from a MakerDAO vault via decentralized asset financing protocol Centrifuge to fund the transaction.

Along the way, a non-fungible token (NFT) containing data on goods and invoices is also minted to track and help keep records of transactions. Mastercard's blockchain traceability solution, Provenance, is also tracking the shipment.

The deal helps showcase the application of smart contracts and stablecoins to the supply chain industry.

Pledge ETH as collateral

Another factor driving MakerDAO’s momentum is the addition of support for staked ETH as a form of collateral for the protocol.

sETH2 allows those who participate in staking on Ethereum and BNB Chain to obtain funds that would otherwise be locked and will be used to earn DeFi income for an unknown period of time.

According to DeFi Llama, the collapse of UST, its knock-on effect and the increase in ETH as collateral positions, made MakerDAO the number one DeFi protocol by total value locked (TVL).

Top 5 Protocols by Total Locked Value Source: Defi Llama

Before MakerDAO topped the list, the TVL of another popular stablecoin liquidity protocol, Curve, dropped from $19.32 billion on May 5 to $8.71 billion on May 16.

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