Journalist
Posted:
- The number of DAI transactions has increased. But there were some concerns.
- MKR observed a price drop along with a declining MVRV ratio.
MakerDAO [MKR] has been one of the most prominent protocols in the DeFi space. Despite the DeFi sector losing momentum last quarter, MakerDAO continued to see growth.
The DAIs are rolling
New data revealed an unexpected 400-500% increase in on-chain DAI transactions over the past four weeks. The last time such high DAI activity occurred was in July and August 2022, with November 2021 being the only comparable month.
One newly active wallet, which has only been operational for a month, has moved $30.6 billion through MakerDAO and Aave, executing transactions worth $100 million each.
Some speculate that these transactions may involve arbitrage bots that provide themselves with payday loans.
1/ There is a huge and unexpected increase of 400-500% in the quantity $DAI used for chain transactions in the last four weeks. pic.twitter.com/3ayJETFg3t
— ChainArgos (@ChainArgos) November 16, 2023
The increase in DAI transactions can positively impact MakerDAO by increasing its overall usage and visibility. However, the involvement of arbitrage bots and flash loans raises concerns.
Arbitrage bots exploit price differences between platforms and potentially cause instability, while flash lending, if abused, can lead to market manipulation and instability in the protocol. These activities may pose risks to MakerDAO’s stability and user trust.
However, there were other factors that favored MakerDAO. One of these was the progress of SparkLend.
A spark
Spark Protocol, part of MakerDAO, offers DeFi lending by accessing Maker liquidity. Midweek, SparkLend on Ethereum witnessed significant growth.
Assets delivered exceeded $1 billion, with a consistent seven-day increase of $167 million. Borrowed assets reached $300 million.
This growth indicates rising demand for DeFi lending through MakerDAO, contributing to the protocol’s overall success and influence in the decentralized finance space.
Only half way through the week and take a look at SparkLend on Ethereum:
⚡️ Assets delivered crossed the $1 billion mark, showing steady seven-day growth of $167 million.
⚡️ Borrowed assets reached $300 million.https://t.co/rER51PTFPr pic.twitter.com/cAYdtA5yXC
— Vonk (@sparkdotfi) November 1, 2023
Bears enjoy
While the protocol performed well, the same could not be said about MKR’s price. Over the past month, the price of MKR has fallen.
Although the price drop was not large, the overall trend of the price movement was bearish. At the time of writing, MKR was trading at $1,347.98 and was dropped -3.62% in the last 24 hours.
Realistic or not, here is the market cap of MKR in terms of BTC
MKR’s MVRV ratio fell with price. This meant that most MKR holdings were unprofitable.
The low profitability of these holders could reduce selling pressure on the token as the price continues to decline.
Source: Santiment