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Why is the old DeFi MakerDAO rejuvenated?
The token MKR of Maker, an old-fashioned DeFi protocol, has performed well in the market recently, but has anyone noticed that its annualized profit has quietly increased by 3 times in the past 3 months?
While MKR outperformed the average altcoin, its price growth was not significant enough compared to a threefold increase in profits.
In other words, MKR's P/E ratio has been compressed significantly.
Maker's recent surge in revenue is largely due to an increase in stability fees (i.e. fees charged to DAI borrowers) and a more efficient allocation of assets on its balance sheet to things like treasuries and investment-grade bonds.
The balance sheet reallocation has already paid off, and Maker fee income will likely continue to rise in the coming months. Not sure why Token Terminal hasn't noticed this yet, but someone is definitely paying attention.
Despite the long weekend in the US, there was $70M of MKR spot traded on Binance over the past 3 days.
We observed some new wallets accumulating MKR, possibly with large funds buying.
Another metric we are watching closely is the market cap of DAI, its rise will drive the profitability of MKR to multiply. Each unit of DAI is now incrementally more profitable for MKR after the stability fee and bond allocation hikes.
It can be easily compared to banks' ability to increase profitability after interest rates rise. Despite paying more interest to savers, interest income from loans grew even more. As net interest income (NIM) rises, so does profitability. Maker is taking these steps to pay DAI holders a higher interest rate on savings, but the increase in income is greater than the payout. As a result, profitability has increased significantly.