Maker (MKR), the central token of the Maker smart contract platform and the Dai stablecoin system, has experienced a phenomenal rally over the past month, bolstered a major partnership and an investment from one of the cryptocurrency industry’s top venture funds.
Less than one month ago, on Sept. 12, MKR was trading below $300. Since then, the token has gone on a tear, rising 159 percent to a present value of $758 on Monday morning. The Maker price has risen 24 percent in the past 24 hours alone, raising the MKR market cap to $552 million and launching the token to 22nd in the market cap rankings.
Investors should note that this massive price swing has been accompanied by relatively little trading volume. Over the past 24 hours, for instance, MKR has seen just $3.3 million in trading volume, with approximately 60 percent of those trades concentrated on OasisDEX.
This caveat aside, though, MKR has seen a dramatic rise, and this rally has correlated with two major announcements regarding the cryptocurrency token.
As CCN.com reported, legendary venture capital firm Andreessen Horowitz (a16z) recently invested $15 million in Maker, acquiring 7 percent of the network’s total currency supply and 6 percent of its total decision-making power. A16z has been investing in the cryptocurrency ecosystem for years, but the firm’s MKR purchase marked its first investment through its newly-launched $300 million cryptocurrency fund, which has received backing from Yale University’s $29.4 billion endowment.
“The investment of A16Z in MKR is conceptually similar to putting dollar savings in a US-based bank. Upon placing a certain amount of money in a bank like Goldman Sachs or JPMorgan, an individual receives a monthly or yearly return based on the program offered by the bank,” CCN.com explained at the time. “With money obtained from its clients, the bank then loans the capital out to trusted businesses and individual investors with high interest to pay out its clients that provided the bank with an initial capital.”
Specifically, MKR holders receive interest when the Maker network issues loans denominated in Dai, an asset-backed stablecoin whose value is collateralized to the U.S. dollar.
While the size of a16z’s investment itself would not have been enough to push the MKR price up this far, the fact that firm of this size and prestige would place such a bullish bet on the asset likely sent a buy signal to retail investors.
More recently, on Oct. 4, the developers of decentralized prediction market Augur announced that they would add support for Dai on the platform, which heretofore had only allowed punter’s to place bets using ether.
Though renowned as one of the most-anticipated dApps and most promising applications of censorship-resistant blockchain technology throughout its multi-year development cycle, Augur has yet to build a sustainable user base in the several months since its deployment on the Ethereum mainnet.
According to DappRadar, the platform — which allows users to bet on the outcome of virtually any future event — had 57 users in the past 24 hours, with a cumulative volume of less than 212 ETH (around $48,000) spread across 184 transactions. That’s above average for the dApp, which has generally seen daily active user figures in the mid-30s throughout September and early October.
Holding ETH is already a gamble, as the second-largest cryptocurrency’s value has both traded above $1,400 and below $170 within the past calendar year. Consequently, some would-be users may be hesitant to further roll the dice by placing bets — particularly those with long time horizons — that could cause them to lose money (i.e. fiat purchasing power) even if they win the bets themselves.
Adding a stablecoin should provide users with the assurance that the assets they are staking and stand to win will retain a consistent value throughout the life of the bet, narrowing the risk associated with staking money in a prediction market to the bet itself. As the developers said, “Integration of a stable coin as the denomination for markets will allow money at risk to be exposed to less volatility.”
Given the growing number of stablecoins available, Augur’s decision to choose Dai for its platform is a huge vote of confidence in the Maker network and its ability to maintain a consistent peg to the value of the U.S. dollar.
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Last modified: June 10, 2020 11:57 AM UTC