MakerDAO’s DAI Ethereum-based Stablecoin Recovers to its Pegged Value of $1

Ever since the year began, the US Dollar-pegged stablecoin, DAI, has struggled to keep up with its peg, mostly trading below $1. However, in a recent turn of good fortune, the DAI has successfully reached and crossed the $1 peg consistently in the past few days across through four different exchange platforms. According to DeFi Pulse, the coin, by MakerDAO, currently sits atop the list of all decentralized finance applications currently available in the sector.

Interest in DAI

Current reports have it that there are around 87 million DAI circulating in the sector, showing that interest in the coin, even as it slowly recovers, seems to be increasing. Further reports also show that the MakerDAO system also has quite a bit of Ether locked in to help buoy the DAI market value. The exact amount of Ether is currently unknown but is said to be worth about $300 million.

DAI at this time is traded at $1 but there are still quite a lot of tokens available, trading below $1. Coinbase, for example, has approximately $600,000 worth of DAI still trading below $1 but above $0.98.

What Could Happen?

At the moment, no one is entirely sure exactly what the future of DAI would look like. However, Alex Svanevik, a data scientist, has insinuated that the recent increase in value should still be lauded. This, he said, would be easier to realize when it is considered that on Coinbase, for example, the coin used to sell as low as $0.95.

“So now that DAI has recovered to $0.99, this is by many considered ‘close enough’ to the $1 peg”, said Alex.

David Hoffman, the COO of RealT – a crypto real estate firm that tokenises the process and also pays rent in DAI – has however noted that the recent events might call for a few questions about the coin, to be answered. According to Hoffman:

“The last three months has been how do we get DAI back to a dollar and now it’s looking like DAI is strongly above 99 cents. That brings into relevancy a bunch of new questions like how close to a dollar should we have? What is an acceptable bound to be around a dollar? How long do we want DAI to be around 99 cents to a dollar before we claim that the peg is fixed?”

Possible Reason for DAI’s Recent Stability

According to the MakerDAO Community Lead, David Utrobin, increase in fees that have happened through the last few months have significantly reduced the amount of DAI available in circulation from 96 million which was its all-time high. The shrinkage might be a significant factor responsible for the stabilization of the coin.

Alex Svanevik corroborated this, adding that the retraction combined with an increase in demand for the coin decisively helped its current status. This demand may have been fuelled by the recent legal troubles faced by other major stablecoin, Tether.

Also, the reduction in the number of DAI available was directly affected when sometime in February, the Stability Fee – which is the interest paid for all DAI loans – was multiplied more than 39 times, representing a 19.5% increase. Since then, more than 30 million DAI have been burned. The direct correlation between the increase in Stability Fees and the contraction in the number in circulation was substantiated by Vishesh Choudhry, a member of the Risk Team at the Maker DAO Foundation.

So, Has the Peg Been Re-established?

At this time, there is no definite way to decisively tell whether the coin’s present stability will be sustained beyond a few days. As Richard Brown, Head of Core Community at MakerDAO, notes, it might “be a week or two before we can say that the peg is restored with any certainty.”

Get Daily Headlines

Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

What to Know More?

Join Our Telegram Group to Receive Live Updates on The Latest Blockchain & Crypto News From Your Favorite Projects

Join Our Telegram

Stay Up to Date!

Join us on Twitter to Get The Latest Trading Signals, Blockchain News, and Daily Communication with Crypto Users!

Join Our Twitter

Add comment

E-mail is already registered on the site. Please use the Login form or enter another.

You entered an incorrect username or password

Sorry, you must be logged in to post a comment.
Bitcoin Exchange Guide