- DAI supply has risen steadily since the year began.
- MakerDAO recorded a decline in fees and revenue in December.
After hitting a four-month low on the 31st of December 2023, the supply of MakerDAO’s [MKR] stablecoin, DAI, has witnessed a remarkable rebound in the first weeks of 2024, data from MakerBurn showed.
It was found that DAI’s supply had plummeted to a low of 5.22 billion DAI on 31st December 2023. The last time it fell to that low was in September.
This decline was attributed to the sideways movements in the price of Ethereum [ETH] as 2023 neared its end due to the anticipation around a spot ETF approval at the time.
The contraction in DAI supply was due to the DeFi protocol’s Collateralized Debt Position (CDP) model. MakerDAO CDP allows its users to generate DAI by collateralizing cryptocurrencies, such as ETH. Users deposit their crypto assets as collateral, and in return, they receive DAI.
The MakerDAO CDP model maintains DAI stablecoin’s value at $1 through interest rate incentives. The automatic system increases or decreases interest rates to encourage the creation or burning of DAI.
This mechanism effectively manages the decrease in DAI supply due to crypto price drops, keeping it close to its target price.
With the year so far marked by an uptick in ETH’s value, fueled by the excitement around the recent ETF approval, DAI’s supply has grown. At 5.29 billion at press time, DAI’s supply has risen by almost 2% from the 31st December low.
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Author: Abiodun Oladokun
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