MakerDAO, the governance token behind the famous stablecoin DAI, has announced plans to increase its United States Treasury bond investments to $1.25 billion from its previous allocation of $500 million. The move comes as the organization looks to take advantage of the current yield environment and generate additional revenue on Maker’s PSM Assets in a flexible, liquid manner.
MakerDAO Proposes Six-Month U.S. Treasury Ladder Strategy to Boost Investments
Under the new plan, the existing $500 million allocation, consisting of $400 million in Treasury bonds and $100 million in corporate bonds, would significantly increase by $750 million. MakerDAO intends to achieve this by implementing a six-month U.S. Treasury ladder strategy involving biMakerDAO Proposes Six-Month U.S. Treasury Ladder Strategy to Boost Investments-weekly roll-overs.
This latest proposal is part of a series of high-profile moves by MakerDAO, including a recent initiative permitting MKR token holders to borrow DAI. MakerDAO has also voted against a $100 million borrowing proposal by Cogent Bank, with 73% rejecting the bid. However, it previously approved a similar loan to Huntingdon Valley Bank, suggesting a willingness to work with more traditional financial institutions.
The stablecoin market has seen a boom after the FTX collapse. The stablecoin sector’s dominance in the overall cryptocurrency market capitalization is rising to 18%, reaching an all-time high. Last month, MakerDAO allocated 5 million DAI to establish a legal defence fund to address legal defence matters not typically covered by conventional insurance policies. It also introduced Spark Protocol, an Aave rival that will utilize DAI for liquidity and launch a lending product as its initial service.
Critics and Opponents of Maker’s ‘Endgame’ Tokenomics
Critics of Maker’s ‘Endgame’ tokenomics argue that it appears too similar to Terra’s Seigniorage Mechanism. This process entails producing and eliminating tokens by market demand. However, opponents of the plan immediately criticized this mechanism, branding it a probable liquidity exit scam that permits users to depart from the ecosystem through DAI without disposing of their MKR tokens but still maintaining control over the protocol’s governance.
Despite the criticisms, MakerDAO has doubled down on its move, with MIP65’s $500 million short-term bond investment strategy providing ~$2.1 million in lifetime fees to MakerDAO as of the end of January 2023. This investment strategy represents over 50% of MakerDAO’s annualized revenues.
In conclusion, MakerDAO’s move to increase its United States Treasury bond investments is a strategic one that aims to capitalize on the current yield environment and generate additional revenue for Maker’s PSM Assets. As the organization continues to make high-profile moves, how the market will react to its ‘Endgame’ tokenomics and other initiatives remain to be seen.