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Maker Price Analysis – Active addresses and volume at record highs as Dai circulating supply decreases

On-chain metrics suggest increasing use of the stable coin despite a decreasing circulating supply.

Maker (MKR) is a utility token, governance token, and a recapitalization resource for the Maker platform, which operates as a Decentralized Autonomous Organization (DAO). Using Ethereum (ETH) as collateral, the MKR platform has been predominantly used to create Dai, a stablecoin with a soft peg to the U.S. Dollar. The MKR market cap currently stands at US$756 million with US$1.86 million traded in the past 24 hours. Dai currently has a free float supply of US$80.28 million.

Rune Christensen, CEO of MKR, first began work on the project in 2015, with Dai launching December 2017. According to Christensen, the funds for MKR were not raised by an ICO, but instead “MKR was sold off over time at a steady pace, initially through our forum and in private deals, and later through sell orders on openledger and now MKR market.” Notable MKR investors include Polychain Capital, Andreessen Horowitz, FBG Capital, and Wyre Capital, who also provides a compliant fiat on/off ramp for Dai.

The Maker DAO, which currently holds 1.59% of all ETH in circulation (chart below), uses a smart contract that backs and stabilizes the value of Dai through a dynamic system of Collateralized Debt Positions (CDPs), autonomous feedback mechanisms, and incentivized external actors. These external actors include keepers, price oracles, and emergency oracles. Although ETH is the only collateral currently accepted for backing Dai, a multi-collateral feature is set to launch later this year. Additional collateral options will be voted on by MKR holders.

Maker Price Analysis 29 May 2019 (1)

In order to participate in the system, a user must first connect an ETH wallet, such as MetaMask, to the MKR platform. ETH can then be sent to MKR to create a CDP. Because ETH is not ERC-20 compliant, the ETH must be sent to escrow and “wrapped,” creating an ERC-20 compliant crypto asset known as Wrapped Ethereum (WETH). A second crypto asset, Pooled Ethereum (PETH), is automatically inflated to pay off debt, or burned to pay for fees when necessary.

After PETH is created, the user retrieves Dai, equivalent to the debt, from the CDP, which locks access to the collateral. A user can retrieve the collateral and pay down the debt plus a continuously accruing stability fee. When the debt and stability fee are paid, the user can retrieve the collateral. A further explanation of the process can be found here.

Maker Price Analysis 29 May 2019 (2)

CDP risk parameters include a debt ceiling, liquidation ratio, stability fee, and penalty ratio. Dai started with a debt ceiling of 50 million Dai, which was raised to 100 million on July 8th, 2018, after the first debt ceiling was reached. The variable liquidation ratio reflects how volatile MKR voters expect the collateral price to be. The stability fee is an annual percentage yield which can only be paid in MKR and is burned, decreasing the MKR supply. The penalty ratio determines the maximum amount of Dai raised from a liquidation and is used to cover the inefficiency of the liquidation mechanism.

Most of the larger CDPs, with greater than one million Dai in debt (chart below), are currently under an ETH price of US$120. These CDPs can also increase or decrease collateral at any time to increase or decrease the liquidation price. All of the largest CDPs currently have a liquidation price below US$160. The largest CDP, 5199, currently holds 9,199,370 in debt at a collateralization ratio of 387% and a liquidation price of US$101.03. CDP 3228, which once held over one million in debt, was recently closed completely and the funds were moved to dYdX, a decentralized derivatives exchange.

Maker Price Analysis 29 May 2019 (3)

In recent months, the Dai stability fee has increased dramatically (shown below). Each stability fee adjustment is voted on by the MKR holders through a voting smart contract. From May to October 2018, Dai remained relatively stable, near US$1. The first stability fee increase occurred on August 6th, 2018, raising from 0.5% to 2.5%. The Dai supply contracted slightly before the increase, but the supply quickly increased in late October. The stability fee was decreased back to 0.5% in late December and the Dai supply increased dramatically.

From February to early May this year, MKR holders continually approved increases in stability fees because the Dai exchange rate persisted below US$1. This lead to increases in the stability fee, which has been as high as 19.5%. The most recent vote decreased the stability fee to 17.5%. Since May 13th, the Dai exchange rate has held mostly above US$1. Polling and Voting on the MKR stability fee will continue on a weekly basis until the community believes that stability has returned to the peg.

Maker Price Analysis 29 May 2019 (4)

Despite the fluctuating stability fees, Dai active addresses (line, chart below) have continued to increase, with monthly active addresses currently at an all-time high. Dai monthly exchange volume (fill, chart below) is also at an all-time high. The strong rising trend of active users and exchange volume suggests incremental on-ramping and trust in the Maker ecosystem.

Maker Price Analysis 29 May 2019 (5)

Other stablecoins, such as Tether (USDT), are typically backed by Fiat currencies, making them non-mineable collateral-backed assets. USDT (dark green, chart below) has firmly maintained it’s stablecoin dominance since competition ramped up in 2018, with more than US$3.12 billion in circulation currently. Dai (red, chart below) has significantly gained in popularity since its inception, but has taken a back seat to other stablecoins in terms of total circulating supply, such as USD-Coin (USDC) (blue, chart below), TUSD (neon green, chart below), and Paxos-Standard (PAX) (pink, chart below). The Gemini Dollar (GUSD) (yellow, chart below) circulating supply has fallen by 75% since early 2019.

Maker Price Analysis 29 May 2019 (6)

Turning to developer activity, the MakerDao project has 150 repos on GitHub, with the Dai repo being one of the most active over the past year (shown below). Most coins use the developer community of GitHub where files are saved in folders called "repositories," or "repos," and changes to these files are recorded with "commits," which save a record of what changes were made, when, and by who. Although commits represent quantity and not necessarily quality, a higher number of commits can signify higher dev activity and interest.

Maker Price Analysis 29 May 2019 (7)

In the markets, MKR (top) exchange-traded volume has been dominated by ETH and BTC pairs over the past 24 hours, while Dai (bottom) exchange-traded volume has been dominated by USD and ETH pairs. Most of the MKR trading volume occurs on Bitfinex, while Dai is the base currency of choice for most decentralized exchanges. Binance, Bitflyer, Bittrex, Kraken, and Poloniex do not currently have MKR pairs. Coinbase currently has tradable MKR pairs for the UK, EU, Canada, Singapore and Australia markets, but they’re not available to customers in the US. Coinbase also has an ETH/DAI pair on the platform, but it is not currently open for trading.

Maker Price Analysis 29 May 2019 (8)

Maker Price Analysis 29 May 2019 (9)

Technical Analysis

MKR has limited chart history due to both a lack of exchange data and trading interest. The crypto asset has ranged from US$500 to US$800 since February on very little trade volume. New exchange listings and consistent daily volume across multiple exchanges will be one sign of increased speculative interest. All market pairs in the following analysis will be assessed using the weekly and monthly exponential moving averages (EMAs), as well as volume.

On the daily MKR/USD pair, volume has increased slightly since February, suggesting some correlation between trading volume and an increase in MKR voting proposals. The 7-day EMA and 30-day EMA have been bullishly crossed since mid-May. Price has also risen above every volume congestion zone and is effectively nearing a new local high, although the US$700-US$850 zone has historically acted as heavy resistance. A move beyond US$1,500 would be a new period of price discovery.

Maker Price Analysis 29 May 2019 (10)

On the daily MKR/BTC pair, the 7-day EMA and 30-day EMA had been bearishly crossed since April, with a bullish cross likely over the next week or two. A bullish 7/30 cross at the bottom of the range would suggest the potential for a bullish reversal. The relative value measure of this pair shows that MKR will likely gain value, in the near-term, when compared to BTC. Volume-based and psychological resistance stands at 0.1 BTC, with any further upside likely finding resistance at 0.13 BTC. The record high for the pair currently sits just under 0.2 BTC.

Maker Price Analysis 29 May 2019 (11)

Lastly, on the daily MKR/ETH pair, the market structure looks similar to the MKR/BTC pair. One MKR token is currently worth 2.77x the price of ETH itself, largely due to the differences in circulating supply of MKR and ETH tokens. The 7-day EMA and 30-day EMA had been bearishly crossed since April. A bullish 7/30 cross at the bottom of the range would suggest the potential for a bullish reversal with significant resistance between at a price of 3 ETH – 4 ETH. The record high for the pair currently sits at 5.43 ETH per MKR token.

Maker Price Analysis 29 May 2019 (12)


MKR and its Dai comprise a complex stable coin system which brings transparency, auditability, stability mechanisms, fallback procedures, and scalability to the stable coin universe. On-chain metrics suggest increasing use of the stable coin despite a decreasing circulating supply. Despite several sharp drops in ETH throughout late 2018 and early 2019, Dai remained stable throughout the tumultuous volatility. Since then, the Dai exchange rate drifted below US$1.00, prompting several stability fee increases over the past few months. Over the past two weeks, the Dai exchange rate has essentially held at or near US$1.00 with the current stability fee of 17.5%. Multi-collateral Dai is likely coming over the next few months, which may bring increased stability to the ecosystem.

Technicals are limited due to the nascent exchange listings or complete lack thereof. Exchanges may feel hesitant to list MKR pairs because of potential unregistered security’s offering implications. Coinbase’s MKR pairs excluding US customers suggests this is an ongoing concern. Over the past two months, MKR has made significant declines against BTC and ETH pairs, while returning to the previous local high of the USD pair. Multi-collateral Dai and further voting proposals will likely lead to increased use and velocity of the MKR token, which will also likely lead to bullish price action.


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