Earlier today, MKR, which was created through MakerDAO to support the steadiness of MakerDAO’s DAI token and empower Dai Credit System governance, was trading at $1,251.14. This figure is close to its Jan. 21, 2018, record of $1,798.70. As of press time, it was trading at $1,068.53.
According to analysts, the recent rally was just a delayed and long-anticipated result of the decentralized finance (DeFi) sector’s rapid growth. The co-founder of Delphi Digital, Yan Liberman, attributed the price rally to the sharply increased supply in DAI, the native stable coin for MakerDAO.
Rune Christensen, developer, and entrepreneur founded MakerDAO in 2014. After a few years, MakerDAO finally launched the stablecoin DAI.
Relationship between MKR and DAI
The MKR token assists its partner stablecoin DAI to be at the same value as one dollar. MKR can be formed and destroyed in response to DAI price fluctuations to maintain DAI’s dollar-equivalent worth.
DAI’s formation occurs when Ethereum blockchain users put assets into the Maker Protocol and borrow against that asset in the form of DAI. MKR then gives its holders voting rights in developing Maker Protocol and DAI.
The MKR token comes for the rescue when the price of ETH falls too quickly for the DAI system to handle. If the collateral system is inadequate to cover it’s value, MKR is created and sold to the market to raise more collateral.
Demand for The Token
Data collected by DeFi Pulse has noted that the DeFi sector is gaining popularity once more, with over $21.6 billion total value as of press time.
According to Ryan Watkins, a research analyst at Messari, compared to the white-hot “DeFi summer” of last year when MKR’s price was“dormant,” the token fundamentals have become better over the past year leading to its demand.
Watkins also noted that initially, MKR wasn’t making any revenue from DAI’s growing demand since the interest charged on users borrowing DAI into existence was 0%. However, Maker later raised interest rates, which led to MKR generating a great deal of revenue. He added that the recent excitement across the industry made the recipe for MKR’s final recognition.
Denis Vinokourov, head of Research at BeQuant exchange, said a recent approval of an executive vote to raise debt ceilings for various vaults could have led to the price surge as well. Analysts also noted the current bull market possibly triggered the rally.