Investing

MakerDAO Weathered Volatility With US Bonds, Plans to Buy $6B More

Tim Fries

Published: September 29, 2023 10:13 pm

MakerDAO, a decentralized crypto lending protocol, plans to double its investments in short-term US Treasuries up to $6 billion. The move comes after the organization picked T-bonds as one of the assets backing its DAI stablecoin following the 2022 crypto winter. The decision reaped significant rewards, lifting MakerDAO’s governance coin MKR to an 18-month high.

What is MakerDAO?

Borrowing and lending crypto via crypto was a tricky endeavor, mainly due to the significant price volatility inherent in these assets. However, one industry player made significant progress in making this process more reliable – the MakerDAO protocol.

Notably, MakerDAO made its way up in the crypto lending space by combining loans with a stable currency, allowing users to borrow money and make predictions about how much they had to pay back. But apart from its innovativeness, MakerDAO displayed impressive adaptability capabilities.

Specifically, the protocol decided in 2022 to diversify the assets backing its stablecoin DAI, rotating away from cryptocurrencies into short-term Treasuries and corporate bonds. The move came after an extreme crypto market downturn last year, prompting MakerDAO to pursue more stable yields.

MakerDAO’s MKR Coin Up 176% YTD Amid Rising Yields

This decision was nothing short of an excellent choice so far for MakerDAO. To be more specific, the protocol’s native governance coin, MKR, skyrocketed 77% in the latest quarter, hitting the highest level since April 2022.

According to crypto market data, MKR is one of the best-performing assets among large-cap cryptocurrencies in 2023, with a year-to-date surge of 176%. The coin’s price was $1,451 at the time of publication.

Given the success, the lender plans to double its T-bonds investments. Earlier in the week, the organization approved a proposal to invest up to $6 billion in short-term Treasuries, which is twice the current limit. MakerDAO has not made any new purchases since the proposal was passed.

The Treasury yields have witnessed a monster rally recently, particularly after the Fed officials “hinted at keeping rates higher for longer,” noted eToro analyst Simon Peters. The surge fueled MKR’s ascent, although there are some signs that the rally may be nearing exhaustion as traders get ready to take profits.

This article originally appeared on The Tokenist