MakerDAO: What rising DAI transactions mean for MKR

Journalist

Posted: November 18, 2023

• The number of DAI transactions has increased. But there were some concerns.
• MKR observed a decline in price along with a falling MVRV ratio.

MakerDAO [MKR] has been one of the most prominent protocols in the DeFi space. Despite the DeFi sector losing its momentum in the last quarter, MakerDAO continued to see growth.

Rolling the DAIs

New data revealed an unexpected surge of 400-500% in DAI transactions on-chain 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, operational for just a month, has funneled $30.6 billion through MakerDAO and Aave, executing transactions of $100 million each.

Some speculate that these transactions might involve arbitrage bots issuing flash loans to themselves.

1/ There has been a huge and unexpected 400-500% surge in the amount of $DAI being used to transact on chain in the last 4 weeks. pic.twitter.com/3ayJETFg3t

— ChainArgos (@ChainArgos) November 16, 2023

The surge in DAI transactions may 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 across platforms, potentially causing instability, while flash loans, if misused, 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 were in MakerDAO’s favor. One of them was the progress of SparkLend.

A spark

Spark Protocol, part of MakerDAO, offers DeFi loans by accessing liquidity from Maker. Midweek, SparkLend on Ethereum witnessed significant growth.

Supplied assets exceeded $1 billion, with a consistent 7-day increase of $167 million. Borrowed assets reached $300 million.

This growth indicates a rising demand for DeFi loans through MakerDAO, contributing to the protocol’s overall success and influence in the decentralized finance space.

Only halfway through the week and look at SparkLend on Ethereum:

⚡️ Supplied assets surpassed the $1 billion mark, showing a steady 7-day growth of $167 million.

⚡️ Borrowed assets hit $300 million.https://t.co/rER51PTFPr pic.twitter.com/cAYdtA5yXC

— Spark (@sparkdotfi) November 1, 2023

Bears relish

Even though the protocol was doing well, the same could not be said for MKR’s price. Over the last month, the price of MKR fell.

Although the drop in price wasn’t large the overall trend of the price movement was bearish. At press time, MKR was trading at $1,347.98 and had fallen -3.62% in the last 24 hours.

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

The MVRV ratio of MKR fell with the price. This meant that most of the MKR holdings were not profitable.

The low profitability of these holders could reduce selling pressure on the token as its price declines further.

Source: Santiment