MakerDAO price is down 55% against ETH this year even as ETH has been outperformed by many DeFi tokens
Ethereum’s DeFi field has experienced parabolic growth over the past few months. However, the growth of the Ethereum space did not support MakerDAO price because MKR has dropped by 55% compared to ETH this year.
The growth of Ethereum’s space has not aided MakerDAO price
The value of coins locked in the DeFi protocol has risen to $ 4.25 billion for the first time. At the same time, the value of the DeFi currency has been on par. Many DeFi projects like Chainlink and Synthetix Network Token have increased hundreds of percent compared to BTC since the beginning of 2020. But things are entirely different than MakerDAO.
Ethereum’s MakerDAO has long been the leading protocol of the entire DeFi industry.
Offering the famous DAI stablecoin and a platform for one to obtain decentralized loans, the protocol now locks in excess of $1 billion worth of cryptocurrency. That makes it the most important protocol to DeFi by far, especially since it offers the stablecoin that underlies many applications, DAI.
Despite MakerDAO’s importance and growth, its native token Maker (MKR) has not performed well against Ethereum in the past year.
Cryptocurrency researcher Hasu commented on the asset’s performance:
whoa, MKR is down 55% vs ETH this year, even as ETH has been outperformed by many DeFi tokens. seems like a rising tide does not float all boats. at the same time, the supply of Dai has increased from ~70m to ~360m. does someone keep track of MKR revenue via burn?
— Hasu (@hasufl) August 3, 2020
The inefficiency of MKR seems to be a byproduct of the income collapse they enjoy, Hasu speculated:
“I found annualized MKR earnings. they did indeed fall of a cliff in the last year, crazy if you consider how much smaller Dai supply was mid-2019. the explanation is probably that Dai has traded consistently above $1 this year and so stability fees are zero… this also means IF Maker ever successfully implements negative rates, revenue to MKR holders is probably going to surge to entirely new levels, now that supply is 4x higher than mid-2019.”
When writing this article, Maker trades for $ 603 or 1.54 Ethereum. Cryptocurrencies also have a market cap of about $ 600 million.
Some say that MKR is undervalued because it is the backbone of DeFi. However, a cryptocurrency analysis team found earlier this year that Ethereum-based assets could be overvalued.
The team from the firm AlfaBlok found that:
“MKR’s then valuation of $350 million implies very aggressive growth rates, of over 70%+ Dai circulation increase per year reaching Trillions of Dai in circulation, for the current valuation to make sense.”
Read more:
- Ethereum Addresses In Profit Now Exceed The Total Number Of Addresses With A Bitcoin Balance
- One Of The Biggest Narratives Over Recent Weeks Has Been Ethereum Extremely High Transaction Fees