MakerDAO Withdraws 250 Million USDC from Coinbase Custody to Bolster DAI’s Peg
MakerDAO, a prominent decentralized finance (DeFi) platform, has recently transferred half of its 500 million USD reserve held in Coinbase Custody to support the peg maintenance of its stablecoin, DAI. This strategic move is aimed at stabilizing the USDC reserve for DAI, which was previously required to maintain a minimum of 200 million USD but had dwindled to just 60 million USD.
The MakerDAO protocol acted swiftly by transferring 250 million USDC, previously held at Coinbase Custody, to replenish the Peg Stability Module (PSM). The PSM acts as a mechanism that enables users to exchange USDC for DAI at a 1:1 ratio, contributing to the stability of Maker’s decentralized stablecoin. The rapid decrease in the USDC reserve raised concerns about DAI’s potential depegging, and addressing this issue was of paramount importance to MakerDAO.
PaperImperium, a contributor to the MakerDAO governance process representing GFX Labs, expressed his concerns, saying, “The worst-case scenario could be DAI depegging within minutes or hours. But you can watch the USDC flow from addresses associated with Coinbase. USDC could be pumped into it within minutes.”
On the past Sunday, the MakerDAO community discovered that the project’s PSM reserve had dropped below 300 million USD. Allan Pedersen, the CEO of the Monetalis lending platform, actively participated in forum discussions, urging the custodial entity SHRM to promptly inject funds into the PSM.
Before the transfer of funds from Coinbase Custody, just over 100 million USD was maintained in the PSM liquidity pool from October 29 to October 31. Within the Maker forum, Pedersen mentioned that the team is working on automating the PSM through smart contract integration. However, at the current stage, the liquidity transfer process depends on various intermediaries, fund managers, legal entities, and centralized exchanges.
The move by MakerDAO to replenish the USDC reserves for DAI through this transfer highlights the importance of a well-maintained stability mechanism in the volatile world of decentralized finance. It underscores the commitment of the MakerDAO community to ensure the stability and integrity of its decentralized stablecoin, DAI, and protect it from depegging risks. The timely action taken to address the reserve imbalance signals the proactive approach of DeFi projects in maintaining the peg of their stablecoins.
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