MakerDAO: What does this exchange's proposal mean for MKR investors?

MakerDAO (MKR) received a proposal around a partnership from leading crypto exchange Gemini on September 29. 

In a tweet from the creator of the decentralized stablecoin, Gemini offered to run GUSD on top of the protocol's ecosystem. GUSD acts as a fiat-backed stablecoin of the Gemini exchange.

Review of the original proposal shows Gemini co-founder Tyler Winklevoss as the lead actor in the proposal. Tyler mentioned that both organizations have had a strong partnership since August 2020.

According to him, increased use of GUSD in the MKR ecosystem means that the exchange will contribute 1.25% of the total GUSD to the protocol. Thus, this will allow GUSD's operation to not interfere with the use of DAI, Maker's stablecoin.

Where does this leave the MKR?

Interestingly, the development was unable to prevent MKR from losing 2.38% of Total Locked Value (TVL). According to a report from DeFi Llama , MKR's TVL is $7.18 billion at press time. Current value means that MKR's TVL has lost 10.18% in September alone. 

Even so, it does not affect investor confidence in the protocol. This is because Curve [CRV], the second-ranked protocol, is not equal to MKR's TVL at $6.08 billion.

As for the sequence of events, MKR investors may have a reason to sell some of their holdings. 

This is due to the current state of the market value to real value (MVRV) ratio. According to Santiment , the MVRV rate is 4.165 percent. At this rate, MKR can trade at the highest level. At press time, MKR is trading at $770.26, up 6.62% from its value on September 29. 

Based on its volume, MKR surpassed $30 million in the same period. With this in mind, MKR investors appear to have increased the adoption rate of the protocol's token. However, there is no confirmation that the increase of MKR will continue.

In the short term, MKR investors can be comfortable with reducing their expectations of their holdings being wiped out. The current rate of volatility has supported this. According to crypto market platform press Messari, the volatility of MKR is 0.69. 

However, this situation does not guarantee higher returns. The crypto market intelligence platform also revealed that MKR's transaction count has increased to 6,600, an improvement from 5,800 on September 29.

While higher interest rates mean positive news for investors, waiting for a possible decline is out of the question.

Finally, feedback from the MKR community shows that many people support Gemini's proposals. Likewise, Tyler attempted to address some of the questions raised. In response to a question about choosing MKR or DAI rewards, Tyler said:

“Customers can choose DAI and MKR as their rewards to earn instant crypto rewards on Gemini credit cards.”

Sep 30, 2022