Falling Crypto Prices Shakes Ethereum’s 1 to 1 Tie with MakerDAO’s DAI Stablecoin
Bitcoin and the entire crypto markets arena are in chaos currently after an abrupt drop in the Bitcoin network’s hash rate that resulted in heavy losses on September 24. Some analysts also believe that eh recent drops are as a result of a disappointing launch of the much-anticipated Bakkt platform.
Ethreum also fell below $150 levels, which affected the peg of ETH based stablecoins. As noted on DeFiSaver's twitter feed:
“Although our automated protection is still in beta, our team is disappointed to have let some of our users down and we are willing to recuperate the losses suffered. […] We ask the owners of these two CDPs to please reach out.”
The Dai Stablecoin is issued and controlled by a decentralized autonomous organization (DAO) called Maker. Even though Dai’s price also mirrors that of the U.S. dollar, it is actually backed by ETH. In order to obtain Dai, users would have to transfer ETH, which will be locked by the DAO. The system relies on a decentralized price-feed “oracle” to adjust the token value.
DeFi Saver also announced its financial operations were hurt by the drop in the Ethereum market prices. It relied on an automated process of monitoring for liquidations. But due to data congestion, the monitoring mechanism failed and led to multiple liquidations, based on volatility. The event underlines the risk of using Ethereum and the ETH token as a basis for decentralized financial operations.
An initial support on the downside is near the $165 level. If there is a fresh decrease below $165, the price may perhaps retest the $152 low. Any further losses could push the price below the $150 support area in the coming sessions.