Crypto focus: MKR, the only token to post over 27% gain last week

MKR is the governance token of the MakerDAO and Maker Protocol. MKR was the only cryptocurrency of the top 200 cryptos by market capitalization to post gains for the week, despite the massive selloff in the cryptocurrency space that saw Bitcoin and other cryptocurrencies trade at prices not seen since January 2021.

The cryptocurrency space saw a massive selloff last week. This sell-off was a reaction to the U.S. increasing interest rate by 0.50% to 1%, the largest increase since 2000, as it handed down its policy decision on earlier in the month. While this is a major factor, another factor also weighing on the market was the LUNA and UST situation which also saw many flee the market due to a lack of confidence.

MKR tokens act as a kind of voting share for the organization that manages DAI. While they do not pay dividends to their holders, they do give the holders voting rights over the development of the Maker Protocol and are expected to appreciate in value in accordance with the success of DAI itself.

What is Maker all about?

  • Maker is an Ethereum-based DeFi lending platform founded by Rune Christensen, that allows users to lock ETH into smart contracts to mint Maker’s DAI stablecoin. DAI seeks to be a stablecoin that is pegged 1:1 to the United States dollar and it touts itself to be a stable, decentralized currency that does not discriminate as, “any individual or business can realize the advantages of digital money.”
  • MKR token is an Ethereum token that describes itself as “a utility token, governance token, and recapitalization resource of the Maker system.” Major decisions like protocol upgrades are made by MakerDAO, a decentralized autonomous organization (DAO) made up of MKR token holders.
  • The MakerDAO was created to help stabilize the value of DAI. The MKR token was created to keep up the stability of MakerDAO’s DAI token by creating and destroying the token as per the price fluctuations of DAI. MKR helps its partner DAI to maintain its value as a dollar equivalent.

Why is MKR raising?

Maker is more or less the DeFi token behind the DAI stablecoin a major competitor of Terra’s programmable stablecoin, UST.  It lets investors mint the collateralized stablecoin DAI. It allows users to lock up a range of crypto such as Bitcoin, Ethereum, or liquidity positions on other protocols such as Curve to mint DAI stablecoins.

  • Because the platform is behind Terra’s known competitor, there is speculation from the cryptocurrency community that the platform and its token will replace Terra’s dominance in DeFi. MakerDAO has proven to be more stable than Terra thanks to having a more effective risk framework for managing stability. Its decentralized risk management is coordinated by the first risk team, a template model team, the internal risk team of the Maker Foundation.
  • Maker’s price has gained over 27% last week and it indicates investors prefer DAI’s safety against UST’s risk of holding. In the midst of Terra’s LUNA token falling to trade at the same decimals of the Shiba Inu token and its stablecoin’s still depegged, MKR price skyrocketed above $2000 momentarily.
  • The price has since retreated and is currently trading at $1,520.34. The spike appears to be a result of Terra’s investors jumping into an alternative, Maker, as LUNA price sinks below $0.1. In fact, the depegging of UST stablecoin led to DAI becoming the fourth-largest stablecoin with a market capitalization of $6.4 billion.
  • Previously, Maker’s DAI stablecoin had lost significant market share to UST stablecoin. Surprisingly, Terra’s co-founder, Do Kwon, confidently stated that the death of DAI stablecoin with the increased popularity of UST.

Bottom line

Although MKR is one of the trending coins in the cryptocurrency community, the macroeconomic factors are still at play as more central banks are looking to impose more contractionary monetary policies to combat the pains caused by inflation.

MKR is ranked #43 with a market capitalization of approximately $1.5 billion. DAI ranks #16 with a capitalization of $6.5 billion. Both tokens have seen exponential increases in their transaction volume as more investors pile into their tokens, especially now that DAI is the biggest decentralized stablecoin by market capitalization, following the fall of UST.

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