MakerDAO takes traditional route, likely to invest $500 million in U.S. securities and bonds

  • The high uncertainty in the crypto market has forced the Maker protocol to look at traditional investment options.
  • The Maker protocol noted that the investment in U.S. securities and bonds will help them boost their bottom line with minimal risks.

Crypto market players are now taking the traditional investment route amid the brutal bear market. To weather the bear onslaught, decentralized autonomous organization MakerDAO plans to invest $500 million worth of DAI stablecoin reserves into several U.S. treasuries and bonds.

MakerDAO is conducting a straw poll in its governance ‘Signal Request’ wherein its members will decide whether the DAI reserves should go entirely into short-term treasuries or split into Treasuries and Bonds in an 80:20 ratio. There’s also a reject option if the participants don’t support any of the allocations. The announcement reads:

The Maker Governance votes to determine how to allocate 500 million DAI between different investment strategies. This allocation poll is a result of the passage of MIP65: Monetalis Clydesdale: Liquid Bond Strategy & Execution.

MakerDAO works as the governing body of the Maker Protocol and is responsible for issuing USD-pegged DAI stablecoins. It issues these DAI stablecoins in exchange for user deposits of Ether and 30 other cryptocurrencies.

As said, this is a major step for a crypto market player moving beyond the crypto market and earnings yields from traditional financial investments via flagship DAI. MakerDAO will allow its participants to vote on its proposals by staking their MKR tokens. Currently, the option of splitting the DAI reserves between treasuries and bonds has secured 99.3 percent of the votes. The governance participation in MKR has also dropped to its 2022-low.

Getting access to financial instruments

MakerDAO said that they have partnered with European wholesale lender Monetalis who will provide them access to financial instruments. Monetalis CEO Allan Pedersen has been behind issuing the Signal Request in the forum that holds options to offer the DAO.

Also, the decision of MakerDAO to invest in traditional financial instruments hasn’t come all of a sudden. Rather, it has come from the recommendations of several members who said that deploying unused funds is the right call. This step will also help the Maker protocol to boost its bottom line with minimal risks. Sebastien Derivaux, member of MakerDAO’s Strategic Finance Core Unit posted an assessment earlier this month on June 20.

Explaining the feasibility of allocation, Derivaux said that despite the amount being high, they have chosen the safe choice for the DAO. He added:

An investment of 500M DAI in this context, that is expected to remain liquid and low volatility, is therefore not a significant risk for the DAI peg nor the solvency of MakerDAO.

Derivaux said that they have filtered these two options after much consideration. This is an interesting case of a crypto market participant finding a safe haven in traditional assets.

Related: “We are not the same” – Tether, USDC and MakerDAO distance themselves from Terra’s failed UST stablecoin

About Author

Bhushan is a FinTech enthusiast and holds a good flair for understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his free time, he reads thriller fictions novels and sometimes explores his culinary skills.

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