A look at how MakerDAO benefits from the growth of LSDs

• MakerDAO saw a surge of interest in wstETH on its vaults.
• MKR price continued to increase along with its velocity.

Due to the dominance of the LSD (Liquid Staking Derivatives) sector, many protocols such as MakerDAO[MKR] have failed to compete with the likes of Lido. However, according to recent data, it appeared that MakerDAO could benefit from the growth of LSDs going forward.

Realistic or not, here’s MakerDAO’s market cap in BTC’s terms

Is MakerDAO anti fragile?

Based on new data, LSDs are at new highs on the MakerDAO protocol. The WSTETH-B vault holds an impressive 309 million DAI, while the WSTETH-A vault accumulated 221 million DAI.

Additionally, the RETH-A vault recorded a substantial amount, with 21 million DAI. These figures reflected the growing popularity and adoption of Liquid Staking Derivatives within the Maker Protocol.

Source: MakerDAO

This trend has positive implications for MakerDAO as it demonstrates the protocol’s ability to cater to users seeking exposure to staking rewards while leveraging their staked assets as collateral for generating DAI. It also indicates that competing in the DeFi sector is not a zero-sum game and one protocol can benefit from another’s progress.

The prominence of LSD-based assets has reached a noteworthy stage, where wstETH has exceeded ETH as the primary crypto collateral for generating the highest amount of DAI debt on the MakerDAO protocol. At press time, the cumulative DAI debt generated from wstETH stands at 530 million. It surpassed the 497 million DAI debt generated from ETH. This shift in dominance underscores the growing popularity and acceptance of wstETH as the preferred choice for collateralization and DAI generation within the MakerDAO ecosystem.

WSTETH has surpassed ETH as the crypto collateral with the highest DAI debt:

• 530 million DAI generated from WSTETH
• 497 million DAI generated from ETH pic.twitter.com/dxxahkEPuK

— Maker (@MakerDAO) July 6, 2023

This shift was driven by the WSTETH-B vault type, which reached a new all-time high of 309 million DAI in total debt.

Source: MakerDAO

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How is MKR doing?

Coming to the token, it was seen that MKR’s price increased materially over the last week. At press time, MKR was trading at $924.74. The velocity of the token had increased during this period as well indicating that the activity around the token had surged immensely. However, in tandem with its price, MKR’s MVRV ratio also grew. A growing MVRV ratio highlighted that the incentive for MKR holders to sell their holdings could be very high at press time.

Source: Santiment