MakerDAO Maintains Trust In USDC Despite Depeg Debacle
March 26 2023 - 12:15AM
NEWSBTC
MakerDAO, the governance community of the popular DeFi lending
platform Maker, has decided to keep using USD coin (USDC) as the
primary reserve asset for the DAI stablecoin. Although USDC
experienced a temporary depeg earlier this month, an overwhelming
majority of the MakerDAO have chosen to retain their faith in the
world’s second-largest stablecoin, dismissing any other viable
options. USDC Depegged Following SVB’s Collapse On
March 10, news broke out about the collapse of the Silicon Valley
Bank (SVB), one of America’s largest banks and a major banking
partner of Circle, the issuing company of the USDC
stablecoin. The following day, Circle released a statement
saying that about $3.3 billion of the USDC reserves were stuck with
SVB, leading to much panic among investors. Although Circle
provided much assurance that the company would cover all potential
shortfalls using personal resources, it was not enough to
neutralize the negative sentiment around USDC, causing the
stablecoin to depeg from its $1 mark. While USDC soon regained its
peg, its value initially fell as low as $0.87, causing much concern
for other stablecoins and DeFi protocols, including Maker.
USDC De-pegs On March 11 | Source: USDCUSD Chart on Tradingview.com
Related Reading: Bitcoin Price Action Mirrors Q1 2021, Volatility
Ahead? MakerDAO Rejects Plan To Diversify From USDC In response to
the depegging event, the MakerDAO was forced to review its DAI
reserves which were all stored in USDC. This is because the
DAI token is considered vital to the multi-collateral lending
operation of the Maker. In addition, DAI also serves as the native
stablecoin of the protocol. To protect investors’ assets from
similar depegging debacles in the future, the Risk Core Unit of the
Maker protocol proposed on March 17 that the DAI reserves be
diversified into other stablecoins, nominating the Gemini Dollar
(GUSD) and Paxos Dollar (USDP) as viable alternatives with lower
market risks. Source: vote.makerdao.com In a poll on March
20, the MakerDAO strongly rejected the proposal, with 79.02% voting
to “Maintain USDC as the Primary Reserve” as against the mere 20%
that voted in favor of diversification. These poll results are
highly welcomed, especially during a time when many investors’
confidence in USDC is shaken. The Maker protocol remains the second
largest DeFi platform in the market, with a TVL of $7.65 billion.
It was launched back in 2017 and is widely regarded as the
first-ever successful DeFi project. Related Reading: XRP
Might Target $0.50 If It Continues To Trade Above This Level State
Of The Crypto Market Currently, the general crypto market
appears to be bearish, with most assets recording an overall loss
in the last week. For example, data from Coingecko shows that
Ethereum (ETH), Binance Coin (BNB), and Polygon (MATIC) have all
suffered losses to the tune of 1.8%, 4.0% and 9.9% in the last
seven days. Meanwhile, Bitcoin has managed to stay afloat, gaining
by only 0.9% in the same period. However, some tokens have been
able to pull off a remarkable uptrend in the last few days. For
example, Ripple (XRP) has recorded an overall profit of 18.0% in
the last week as optimism concerning the Ripple vs. SEC court case
continues to grow, with a ruling expected in the first half of
2023. Featured image: The Block, Chart from Tradingview
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