According to a Bloomberg reportMakerDAO, one of the prominent cryptocurrency decentralized lenders, has reaffirmed its decision to invest billions of dollars in US government bonds.
This strategic move has seen the board currency, MKR, reach its highest level since April 2022, outperforming other major companies. cryptocurrencies, included Bitcoin (BTC).
MKR has experienced a remarkable 77% increase this quarter, becoming the best performing cryptocurrency of the year. Despite a modest 3.9% drop to $1,452 on Friday, the coin has almost tripled in value.
MakerDAO is doubling down on government bonds
According to DefiLlama facts, MakerDAO currently oversees $4.6 billion in assets. MKR’s rally can be attributed to MakerDAO’s decision in 2022 to convert the backing funds of its stablecoin DAI into assets such as short-term US government bonds and corporate bonds.
This strategic shift was aimed at seeking more stable returns amid the downturn in cryptocurrency markets. Subsequently, MakerDAO approved a proposal that allows the investment of up to $6 billion in short-term government bonds, doubling the existing limit.
Simon Peters, analyst at investment platform eToro, suggests that the recent gains in the MKR can be attributed to rising government bond yields as a result of the Federal Reserve’s signals to keep interest rates high for longer.
However, signs of a possible slowdown in the MKR rally have emerged. Data from CryptoQuant shows a gradual increase in the number of MKR tokens on centralized exchanges (CEX), indicating that some traders are preparing to secure profits from the recent surge.
It is striking that the decline on September 29 prior to the month-end closing represented the largest decline since mid-September.
According to Bloomberg, traders’ enthusiasm for MKR has extended to DAI, MakerDAO’s stable currency. DAI’s circulation has grown from a low of $3.9 billion on August 20 to $5.5 billion.
In addition, MakerDAO introduced a limited-time offer of an 8% annual return to DAI holders, which, combined with the approval of the investment proposal, could potentially trigger a new wave of short-term government bond purchases.
Allan Pedersen, the CEO of Monetalis, a company assisting MakerDAO with its investments, said that if DAI’s supply continues to increase, it could lead to a significant expansion of MakerDAO’s T-bill investments in a short time frame.
The developments surrounding MakerDAO’s investment strategy in US Treasuries, which have propelled MKR to new heights, indicate a calculated move to achieve stability and sustainable returns through the decentralized protocol.
MKR hits 18-month high
MKR has fallen over 4.5% in the last 24 hours, returning the token to its current trading price of $1,452. However, over the past month, MKR has shown consistent gains across different time frames, with notable increases of 12%, 19%, and almost 40% over the seven, fourteen, and thirty day periods respectively.
Additionally, MKR has hit an impressive 18-month high, rising 101% this year and briefly peaking at $1,590 earlier on Friday.
In the short term, to protect against a prolonged decline, MKR has two crucial support levels that bulls must defend. The first immediate support is at $1,430, while the second support level, which spans two months, is at $1,341.
Meanwhile, MakerDAO and its ecosystem appear poised for further gains with their investment strategy. With a few months left in 2023, there is potential for MKR to end the year as the best performing asset if the ongoing rally continues.
Featured image from Shutterstock, chart from TradingView.com