- MKR price skyrockets as Dai adoption accelerates.
- LUNA is approaching an all-time high on a number of short- to medium-term catalysts.
There are three main types of stablecoins; Backed by algorithmic, overcollateralized, fiat money.
The adoption of decentralized stablecoins, namely Dai and UST, has been on the rise.
MakerDAO's governance token, MKR, is booming as Dai adoption increases.
LUNA is creeping toward an all-time high in a series of short-to-medium-term catalysts.
SHIB backs down on News that a $ 5.7 billion SHIB wallet moved a large chunk of the funds to four different wallets, likely to be sold.
NFTs are holding firm as the assets they are traded on continue to rise.
The latest in Macro:
- S&P 500: 4,660, + .65%
- NASDAQ: 15811, + 1.04%
- Gold: $ 1,770, -.42%
- Crude oil WTI: $ 80.11, -4.53%
- 10-year treasury: 1.603%, + .067%
Latest on Crypto:
- BTC: $ 63,204, + .40%
- ETH: $ 4,615, + 2.12%
- ETH / BTC: .0730, + .60%
- BTC.D: 43.32%, - .88%
DAI and UST adoption continues
Stable currencies are a form of digital asset that aims to link its market value to an external reference such as the US dollar. Some of its main use cases include interaction with different applications on DeFi or for remittance payments.
The stablecoin market has grown to nearly $ 128 billion, representing an increase of about 500% over the past 12 months, according to a report released by the US Treasury earlier this week.
There are three main categories of stablecoins:
- Backed by Fiat
- The two largest stablecoins, USDC and USDT, are fiat-backed stablecoins issued by the Circle and Tether companies respectively. In theory, these companies have $ 1 of reserves for every 1 USDC / USDT that is issued so that token holders have redemption rights.
- Some problems with fiat-backed stablecoins include: relying on a centralized entity in fact to have the reserves they claim and holders are subject to censorship by governments wherever they are domiciled.
- The two largest stablecoins, USDC and USDT, are fiat-backed stablecoins issued by the Circle and Tether companies respectively. In theory, these companies have $ 1 of reserves for every 1 USDC / USDT that is issued so that token holders have redemption rights.
- Over-guaranteed
- For every stablecoin that is minted to the market, there is an overcollateral of various crypto assets to back it up. The link is maintained through arbitrage opportunities. Borrowers who mint overcollateralized stablecoins must maintain a minimum amount of collateral in USD terms to avoid being liquidated.
- Some problems with these types of stablecoins include: they can only be minted if the market is in the mood to borrow against your assets, which may not be able to match the parabolic demand that stablecoins have seen to date. Also, the stablecoin is only as good as the collateral behind it.
- For every stablecoin that is minted to the market, there is an overcollateral of various crypto assets to back it up. The link is maintained through arbitrage opportunities. Borrowers who mint overcollateralized stablecoins must maintain a minimum amount of collateral in USD terms to avoid being liquidated.
- Algorithmic
- With this type of stablecoin, chain incentives ensure that the stablecoin maintains its fixed price. There is no external guarantee to back these stablecoins and they are highly experimental.
- One of the main problems with algorithmic stablecoins is that if on-chain incentives fail, the stablecoin could go offline and potentially go to zero.
- With this type of stablecoin, chain incentives ensure that the stablecoin maintains its fixed price. There is no external guarantee to back these stablecoins and they are highly experimental.
MKR and Dai
Dai is a native overcollateralized stablecoin from MakerDAO (MKR). It is the largest decentralized stablecoin and can be minted in Oasis connecting a wallet and posting a digital asset as collateral.
Dai's total supply amounts to 8,130 million, an increase of 672% in the last 12 months.
Critics say it is not decentralized enough because a large part of the collateral used to generate Dai is USDC, a fiat-backed stablecoin referenced earlier. However, the USDC now only represents 33.4% of Dai's guarantee, up from 50% months before, according to the writer Emily Tonelli.
MRK revenue
MKR's revenue is derived from three main sources, according to a Messari report:
- Interest income from oversecured loans
- Settlement income from commissions charged on liquidated vaults
- Stablecoin trading fees from the Price Stability Module (PSM)
The report goes on to explain how the revenue generated by the Maker protocol indirectly accrues for token holders. Currently, cash flows are used for three main purposes which are:
- Cover protocol development and operating costs
- Creation of a security cushion to cover possible losses due to liquidation (also known as surplus cushion)
- Buy and burn out-of-circulation MKR tokens
Hence, the MKR token benefits from increased Dai adoption. As Dai's offering expands, the revenue generated should also increase, unless changes are made to the protocol:
Sam MacPherson, a protocol engineer at MakerDAO, dedicated himself to Twitter to announce the D3M initiative, which will give one of the largest lending and lending protocols on Ethereum, Aave, privileged access to mint Dai once the trial debt ceiling is raised. This has MakerDAO enthusiasts excited about Dai's expansion and further appreciation of the price of its governance token: MKR.
The MKR token was last traded at $ 3,190, up 32.66% in the last five days.
LUNA and UST
Terra's largest stablecoin, UST, is algorithmic. There is no collateral backing UST other than its reserve token, LUNA, which has a fixed supply. Whenever a UST is struck, one LUNA dollar must be burned.
โLUNA helps maintain UST's link with the dollar through an arbitration mechanism. As long as the UST is trading above parity, users can send $ 1 from LUNA to the system and receive 1 UST, โaccording to Messari. report. โIn contrast, when UST is trading below parity, users can send 1 UST to the system to receive $ 1 from LUNA. In both cases, users are encouraged to arbitrate and help maintain UST's peg to the dollar. "
Due to the fact that LUNA is burned in order to coin UST, LUNA holders are pushing relentlessly for further UST adoption.
UST has experienced explosive growth, reaching a circulating market capitalization of more than $ 2.8 billion. But during the peaks of volatility in the crypto markets, the stablecoin has lost its parity as seen in the following chart:
In May 2021, when digital assets crashed, UST holders freaked out and there was a roughly 25% contraction in circulating supply, leading to the price of UST falling below its $ 1 parity.
This type of algorithmic stablecoin bank run is often referred to as a "death spiral", in which the entire economy falls to zero. This has happened to numerous algorithmic stablecoins in the past.
"The reason Terra has been resilient during the market downturns is because there is a vibrant economy being built on the Terra blockchain and I think that's the best defense algorithmic stablecoins can have against spirals of death, "said Do Kwon, co-founder. of Terra, in a podcast.
LUNA closes in on ATH on bullish catalysts
- UST offering expansion discussed above.
- MIM's UST Degenbox to launch soon, according to media Article by Abracadabra.Money.
- Anchor protocol offering a fixed APY of 19.5% on UST deposits.
- 283.05 million LUNA has a stake in the 399.88 million of circulating supply, which makes 70.7% of the circulating supply illiquid.
- Pending proposal to burn about 10% of LUNA's supply from the community fund to boost UST's liquidity for an insurance protocol called Ozone. This would mark one of the largest burns of a major protocol to date.
- A recent interview with Do Kwon, where he states that there are plans to create a stability-increasing platform with $ 1 billion in BTC to back LUNA with the most pristine collateral in the digital asset arena.
Numerous protocols are also being rolled out at Terra in the coming months that many hope will drive organic demand for UST and thus lead to more LUNA burning. There are too many projects to go into detail here, but the following Twitter thread provides a detailed description:
As a result, MOON is approaching an all-time high, the latest price at $ 48.27. It has increased by 18.41% in the last seven days.
Shiba Inu retraces his steps
SHIB last traded down 15.45% in News that a $ 5.7 billion SHIB wallet moved a large chunk of the funds into four different wallets, likely to be sold.
DOGE has regained its place as the best dog in the world of cryptocurrencies. SHIB is the 11th largest cryptocurrency with a market capitalization of $ 33.71 billion. DOGE is the ninth largest cryptocurrency with a market capitalization of $ 35.53 billion.
Non-fungible tokens (NFT)
Commercial data of Open sea and Solanalysis of some of the main Solana and Ethereum projects can be found in the photos below:
If you made it that far, thanks for reading! Hope to catch up tomorrow.
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Sam martinBlockworks
Reporter
Sam Martin is a Columbus reporter covering the convergence of traditional financial markets and digital assets. He previously worked in the agricultural industry at a hedging desk. He graduated from the University of South Carolina with a double major in International Business and Supply Chain Management, as well as a minor in Japanese.
