MakerDAO price rebounds as DAI maintains its peg and investors seek stablecoin safety

It has been a tough few weeks for the cryptocurrency market. The price of Bitcoin (BTC) is way off most analysts’ price estimates, several stablecoins have lost their pegs, and the demise of one of the major decentralized finance (DeFi) platforms has triggered an event that has led to the disappearance of $900 billion from the total crypto market capitalization.

Amid the widespread fallout, MakerDAO (MKR) managed to turn crisis into opportunity and the collapse of TerraUSD (UST) drew attention to DAI, the oldest decentralized stablecoin.

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Data from Cointelegraph Markets Pro and TradingView shows that as the Terra (LUNA) price crash accelerated from May 9 to May 12, MKR soared 66.2% from a low of $952 on May 12 to its current value of $1,587.

MKR/USDT 1 day chart. Source: Trading View

Three possible reasons for MKR’s reversal of momentum include maintaining its peg by DAI during the recent market turmoil, using a MakerDAO vault to fund supply chain shipments, and l added Staked Ether (ETH) as a form of collateral to mint DAI.

DAI remains stable during severe market turbulence

One of the most important factors giving investors more confidence in the MakerDAO ecosystem is the fact that DAI maintained its peg to the dollar during a volatile market that saw a handful of the most popular stablecoins lose their pegs.

At the peak of the volatility, the price of DAI oscillated from a low of $0.9961 on May 11 to a high of $1.0046 on May 12 and its current price is $0.9994.

The stability of DAI despite a drop in supply of more than 2.2 billion DAI may have given investors more confidence, especially after Tether (USDT) briefly saw its price bottom at 0, $9704.

Real-world adoption continues

Another factor driving MKR is its growing adoption in the real world. Recently, the MakerDAO Vault was used to fund an Australian beef shipment and additional “use cases” are being planned.

On May 9, a MakerDAO vault was used in conjunction with decentralized asset finance protocol Centrifuge to allow trade finance provider ConsolFreight to mint the DAI that was used to fund the transaction.

A non-fungible token (NFT) containing shipping and billing data was also created during the process for tracking purposes and to help keep track of the transaction. The shipment is also tracked using Provenance, Mastercard’s blockchain tracking solution.

This transaction demonstrated an application of smart contracts and stablecoins in the supply chain industry.

Ether staked as collateral

Another factor giving MakerDAO momentum is the addition of support for staked Ether as a form of collateral on the protocol.

sETH2 allows those who participate in staking on the Ethereum BNB chain to access funds that would otherwise be locked up for an unknown amount of time and use them to earn a return in DeFi.

The collapse of UST, its ripple effects, and the addition of Ether as collateral position MakerDAO as the highest-ranked DeFi protocol by total value locked (TVL), according to data from Defi Llama.

Top-5 protocols by total value locked. Source: Llama Challenge

MakerDAO claims the top spot after Curve, another popular stablecoin liquidity protocol, saw its TVL drop from $19.32 billion on May 5 to $8.71 billion on May 16.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.