- MakerDAO’s MKR token sees a significant rise, correlating with the Federal Reserve’s rate hikes and the growing stash of Treasury Bills within the protocol.
- Adjustments to tokenomics, including a new buyback program, have supplemented this growth and fueled increased liquidity for MKR.
MakerDAO’s native governance token, MKR, has witnessed impressive growth this week, despite fluctuations in response to recent rate hikes from the Federal Reserve. MakerDAO, a blockchain protocol, allows for the creation of USD-pegged DAI against over-collateralized deposits of various cryptocurrencies, like Ethereum or Uniswap’s UNI token.
On Wednesday, the Federal Reserve implemented another 25-basis-point increase, shifting the federal funds rate to between 5.25% and 5.50%. Simultaneously, MKR experienced a notable rise from $1,119 to $1,266, marking a 13% surge, although it has slightly corrected since then.
The Impact of Real-World Assets and Tokenomics Adjustment
Several factors contribute to this increase, but one noteworthy aspect is the recent incorporation of Treasury Bills (T-Bills) into the protocol. Daistats data reveals that there are now $1.732 billion worth of T-Bills within Maker. As part of its “Endgame Plan,” MakerDAO has been diversifying its treasury by including real-world assets (RWAs).
With the rise in interest rates, this collection of T-Bills is generating substantial revenue for MakerDAO. Besides, the protocol has also made changes to its tokenomics to accommodate this growth.
In its journey to convert stablecoin deposits into yield-generating traditional financial assets like U.S. Treasury bills and institutional loans, MakerDAO has grown its RWA portfolio. The proportion of RWA assets, predominantly U.S. T-bills, for DAI collateralization has risen from 23.3% at the end of May to 35.1% by July 27.
These RWA assets have become the primary revenue source for the protocol, making up 54% of its total income. The revenues stem from minting DAI fees and yields on collateral like U.S. T-bills. As Maker’s exposure to U.S. T-bills expands and the Fed increases rates, the yield on DAI also grows, bolstering the protocol’s revenue.
MakerDAO’s revenue has soared tenfold since October 2022, when it started buying treasury bonds, jumping from a daily earning of $31,300 to over $320,000 in June.
To enhance MKR’s liquidity across various decentralized exchanges, the MakerDAO community recently launched a Maker Burn Engine program on July 18. This program buys back a portion of the MakerDAO’s surplus revenue and burns part of it.
The new program has already increased the projected MKR buyback by 1,622 MKR worth $2 million in less than ten days, providing a significant contribution to MKR’s price surge.
Finally, data from Nansen reveals that the “smart money” wallets – the wealthy and most profitable addresses – have been actively accumulating MKR since the beginning of the year. Despite a slight decrease in the total supply held by these wallets, the number of “smart money” wallets holding MKR continues to rise.