• MKR holders react as the Spark protocol reaches its latest DAI debt limit.
• Assessing the correlation between the debt ceiling and MKR’s price action.

MakerDAO has been minting more of its DAI stablecoin recently due to incentivized demand from the Spark protocol. We recently looked into how this demand works but the latest announcement calls into question whether the demand can continue.

Is your portfolio green? Check out the MKR Profit Calculator

What happens when the amount that can be borrowed reaches its limit? According to MakerDAO’s latest announcement, Spark protocol just reached its 200 million DAI debt ceiling. In addition, this happened within just eight days after raising the debt ceiling from 20 million DAI.

After expanding its debt ceiling from 20 million to 200 million DAI, Spark Protocol maxed out its DAI borrows in just 8 days.

Impressive.

→ https://t.co/SK1gLOSe32 pic.twitter.com/RyB0yziAix

— Maker (@MakerDAO) August 15, 2023

The development raises questions as to how it could impact the ecosystem. More importantly, whether it will have a negative impact on DAI demand, and therefore the demand for MKR. On the other hand, this is not the first time that the Spark protocol reached its DAI debt ceiling.

There is always room for a higher debt ceiling depending on demand. Unfortunately, that demand has so far been fueled by the incentives to earn a return on holding DAI. Saturation will occur at some p

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Author: Michael Nderitu

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