MakerDAO Voting on Making 'Safe Investments' to Help Weather the Bear

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In a move designed to add 'safer' investments to its portfolio so as to shore up its positions going forward, "MakerDAO is currently voting on a proposal aimed at helping it weather the bear market and utilize untapped reserves by investing 500 million Dai stablecoins into a combination of US treasuries and bonds" [Newar, B. MakerDAO looks to invest $500M into ‘minimal risk’ treasuries and bonds. (Accessed June 29, 2022)].

Following a straw poll in a governance 'Signal Request,' the decentralized autonomous organization (DAO) members now must decide whether the dormant DAI should go entirely into short-term treasuries or split 80% into treasuries and 20% into corporate bonds.

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The DAI token is a U.S. Dollar backed stablecoin which is issued in exchange for investor deposits of Ethereum, Wrapped Bitcoin, or approximately 30 other cryptocurrencies. It should be stressed that this is not necessarily a move to entrench following the Terra/UST crash as MakerDAO's DAI stable performed well throughout the fallout therefrom [See, e.g. Nagoda, K. Beyond TerraUSD - Beware of Two Additional UnStablecoins. (Accessed June 29, 2022). A brief look at the 3 Month DAI price chart supports this position:

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Nonetheless,

this proposal represents a major step for Maker DAO as it signals its intent to extend beyond the crypto realm and earn yield from traditional “safe” financial investments with its flagship DAI... The DAO’s decision to invest such a large amount of funds is based on recommendations by several members who believe that deploying the unused funds could help boost the protocol’s bottom line with minimal risk.

[Newar, supra].

When an option is chosen in the poll ending June 30, 2022 at 12:00 EDT, Monetalis, a European wholesale lender, will provide MakerDAO with all necessary and appropriate financial instruments to comply with the vote.

On June 20, 2022, following a brief, but detailed, review of the MakerDAO Balance Sheet, Sebastien Derivaux, Member of MakerDAO’s Strategic Finance Core Unit, concluded:

The financial investment considered here are low volatility with a Capital at Risk way below 4%. 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, S. MIP65 - Asset Purchase and Allocation Restriction Verification. (Accessed June 29, 2022)].

[The full text of Derivaux's Balance Sheet review may be found by clicking here.]

At the time of the writing of this article (June 29, 2022 at 04:37) Maker (MKR) is trading at $959.88 per CoinMarketCap, down 3.35%. A quick look at the Maker 3 Month Price Chart shows this price is significantly down from the period high.

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