MakerDAO: As DAI Supply Hits 18-Month Low, What’s Next?

2024-02-04 18:06:14

• DAI supply has fallen to its lowest level in 18 months.
• MKR’s Awesome Oscillator has hinted at a decline in token accumulation.

The total supply of MakerDAO [MKR] Decentralized stablecoin DAI has fallen to its lowest level since August 2023, according to data from burn maker.

A decrease in DAI supply is due to the protocol’s Collateralized Debt Position (CDP) model, which operates as a self-regulated market.

When the prices of the assets backing the stablecoin fall, the interest rate for borrowing DAI on the platform increases.

This makes loans more expensive, leading new borrowers to avoid taking out new loans and causing existing borrowers to quickly pay off their loans to avoid high fees.

All of this culminates in a decrease in the overall supply of ICD.

AMBCrypto noted that most of the drop occurred between January 30 and 31, when DAI supply fell by 6%.

For context, the supply of the stablecoin decreased from 5.2 billion to 4 billion during the 24-hour period.

Fuente: MakerBurn

Why you have to be careful

At press time, MakerDAO’s native token MKR was trading at $2,009, according to data from CoinMarketCap.

Readings from MKR’s Moving Average Convergence and Divergence (MACD) indicator showed that the bears regained control of the market on January 18.

However, they have failed to initiate any significant price decline.

This is because the altcoin continues to enjoy a sustained flow of demand. At the time of this publication, its Relative Strength Index (RSI) was 56.14 and was in an uptrend.

This suggested that while a bearish cycle might have begun, bulls continued to accumulate MKR tokens.

Confirming the steady influx of liquidity into the MKR market, its Chaikin Money Flow (CMF) was in an uptrend above the zero line at the time of this publication.

The returned CMF value of 0.03 was a sign of strength in the market. It showed that token accumulation exceeded selling activity.

However, although the accumulation persisted, the status of MKR’s Awesome Oscillator (AO) showed the need for investors to be cautious.

This indicator measures the strength and direction of an asset’s trend over a given period. At the time of publishing, the MKR AO indicator returned upward-oriented red histogram bars.

How much they cost 1,10,100 MKR worth today?

This suggested that the building pressure was weak compared to the underlying bearish sentiment, which had a longer-term horizon.

This signaled that there could be a possible price reversal once buyer exhaustion occurs.

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