• MakerDAO has proposed a debt ceiling breaker to protect their system from volatility and maintain liquidity.
• The proposal was necessitated by USD Coin losing its parity with the US dollar, leading to a temporary loss of dollar parity for DAI.
• MKR’s demand faltered and prices dropped due to the lack of new liquidity.
MakerDAO Proposes Debt Ceiling Breaker
MakerDAO [MKR] has initiated an emergency executive proposal in order to introduce a debt ceiling breaker for collateral assets used to mint its DAI stablecoin. This action became necessary after USD Coin [USDC] lost its parity with the U.S. dollar last weekend, resulting in a temporary loss of dollar parity for DAI.
Purpose of the Debt Ceiling Breaker
The purpose of the debt ceiling breaker is to maintain the stability of the MakerDAO system by limiting the number of DAI that can be issued against any given collateral asset locked in the Maker protocol. With this new proposal, MakerDAO aims to handle scenarios where the underlying collateral asset is experiencing substantial volatility. This mechanism will enable MakerDAO to safeguard its liquidity and prevent losses in such situations.
MKR Demand Falters
Because of its statistically significant positive correlation with Bitcoin [BTC], MKR experienced an initial price rally following Federal Regulators‘ decision to make all SVIB depositors whole. However, due to lack of new liquidity, MKR’s price soon declined and stagnated any possible uptick. According Santiment data, daily active addresses trading MKR dropped by 86%, while new demand decreased by 95% over four days at press time.
At press time, MKR’s RSI rested above its centerline at 54.17, while its MFI, on an uptrend, was pegged at 41; however token accumulation was not enough for significant price growth according to MACD indicator analysis .
Despite initial optimism surrounding MakerDAO’s emergency executive proposal for a debt ceiling breaker ,MKR’s demand has since been slipping as evidenced by network activity data from Santiment . Despite token accumulation being evident on daily charts , prices have yet failed to experience significant growth due MACD indicator analysis .