Maker has gained 53.5% in the past month, and the cryptocurrency saw a remarkable 28.1% gain between July 15 and July 22, achieving its highest daily endpoint in nearly a year. While the gains are impressive, the real question is: can the cryptocurrency sustain its current trajectory, or were short-term factors behind the price increase?

MakerDAO, the decentralized autonomous organization (DAO) responsible for the Dai (DAI) stablecoin and governance token Maker (MKR), unveiled a five-phase roadmap in mid-May. The upgrade plan, dubbed “Endgame,” includes the introduction of a new blockchain, a rebrand, and two tokens with updated functionality.

Rune Christensen, co-founder of MarkerDAO, revealed that the primary component of the “endgame” involves developing an incentive program for interaction and governance participation based on a new on-chain connected to the Ethereum network. Essentially, users will have the ability to initiate a hard fork in response to lightning strikes or abuse.

It seems simplistic to attribute the recent rally solely to these proposed changes, given that Maker’s price held steady for the 30 days following the announcement. As a result, investors seeking to understand MKR’s movement must dig deeper to identify the exact triggers behind price increases.

Venture capital funds offload MKR

According to crypto markets and decentralized finance analyst Nay, Paradigm Capital has sold a significant portion of its MKR investments in March. In addition, A16z, another major venture capital firm that previously invested in Maker, has been reducing its position in recent weeks.

2/ The last two US-based VCs have surrendered.

Paradigm dropped its bag 4 months ago, and the a16z is still in the process of being finished. Interestingly, they are using the same desk for the execution as well. complete disbelief.

Polychain and Dragonfly Unleash Everything $mkr year ago pic.twitter.com/DdsHs6gxzd

— Nay (@nay_gmy) 15 July 2023

While determining whether their selling pressure is easing is proving challenging, one of the most significant risks for Maker has always been secondary token sales to venture capitalists since April 2019, with an average price of less than $250, which amounts to 170,000 MKR.

According to Nay, Polychain and Dragonfly have also previously withdrawn their positions, giving credibility to the rally based on anticipation from other venture capitalists.

Simultaneously, Christensen reinforced his commitment to the long-term performance of the project by reducing positions in Lido DAO (LIDO) and increasing stakes in MKR, according to his public Ethereum address.

Buyback mechanism reduces MKR supply

Collateralized Lending Positions (CDPs) enable users to borrow DAI from MakerDAO using crypto assets as collateral. The smart contract then issues the DAI, allowing borrowers to use it freely.

The previous Smart Burn mechanism involved burning DAI when the CDP was turned off. However, this poses a challenge if multiple CDPs close at once, leading to a shortage of DAI.

In contrast, the new Smart Burn mechanism involves buying MKR from the market and burning it independently of CDP closures. This allows MakerDAO to respond effectively to changes in the market and consequently reduces the MKR supply, which has a positive effect on its price.

Real-world assets boost protocol revenue

According to MakerBurn data, MakerDAO has increased its earnings by an impressive 343% in three months by reducing reliance on the USD Coin (USDC) stablecoin and incorporating yield-generating real-world assets. The change included reducing the fixed currency ratio from 62.4% to 20.2% over three months.

Unlike other stable coins, DAI yields to its holders through the DAI Savings Rate (DSR), a variable interest rate users can earn by depositing DAI into a DSR contract.

Connected: Korean Bank Researches Stablecoin, CBDC Alternative

While the increase in DSR has not yet reversed the DAI supply trend, mainly due to its 3.5% yield being lower than traditional fixed income investments offering 5%, the protocol’s high savings rate increases the odds of maintaining its 4.5 billion DAI supply.

a spindle that can just do the work

The maker is well positioned to maintain its rally due to implementation of buyback mechanism, a remarkable 343% increase in revenue and reduced risk following venture capital exit strategies. Additionally, the reinforcement of the co-founder’s commitment by adjusting his stake in favor of MKR adds confidence to its future prospects.

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