As reported by IntoTheBlock about towhile the entire crypto market is facing a downturn Maker’s (MKR) The price has soared by as much as 77 percent in a few hours today amid speculation that Terra’s dominance in DeFi may change. The DeFi token behind the DAI stablecoin appears to be benefiting from the fall of its rival Terra’s UST.
The fact that MakerDAO has a more effective risk framework for managing stability has proven to the community that it is more committed than Terra. UST and DAI, has always been in an inverse correlation. MKR gained popularity during the current market downturn as DAI is currently the safer investment of the two competitors.
Maker can dominate DeFi as a result of Terra’s fall
The price surge that Maker has experienced in the last 24 hours shows that investors prefer the security of DAI over the holding risk of UST. Maker, an Ethereum-based DeFi protocol, allows investors to print collateralized stablecoin DAI. The platform also allows users to lock a number of cryptos such as Bitcoin, Ethereum, or liquidity positions in other protocols such as Curve to mint DAI stablecoins.
Terra’s native cryptocurrency LUNA has dropped more than 90 percent in the past 24 hours after LFG’s plans to raise $1 billion for the UST stablecoin failed. Maker price For a moment, it skyrocketed to over $2,000. The price has since pulled back and is now trading around $1,370, up 11 percent. This spike appears to be the result of Terra’s investors jumping into Maker as the LUNA price drops below $1.
Also, the de-peg removal of the UST stablecoin led to DAI becoming the fourth largest stablecoin by market cap for a short time. Previously, Maker’s DAI stablecoin had lost a significant portion of its market share against the UST stablecoin. Terra founder Do Kwon also suggested that the growing popularity of UST has led to the demise of the DAI stablecoin.
Governance and decentralized risk management maintain the stability of Maker and provide support for its stablecoin, DAI.
How is DAI sustaining its dollar peg during extreme volatility?
Maker is known as one of the oldest DeFi projects. The platform also allows users to gain exposure to assets like Bitcoin, backed by DAI credit. During declines in positions below margining thresholds, the DeFi token liquidates positions. This ensures that the DAI remains stable with the US dollar even during periods of extreme volatility.
Unlike UST, DAI is not an algorithmic stablecoin but instead uses a collateralized reserve to maintain its stable value. Given the heated history of algorithmic stablecoins, this could make it a superior alternative.
You can check the price movements here.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, KoinFinans and the author of this content cannot be held responsible for personal investment decisions.