The popular DeFi lending platform Maker's governing group, MakerDAO, has chosen to continue utilizing USD coin (USDC) as the main reserve asset for the DAI stablecoin.
Even though USDC temporarily lost its peg earlier this month, the vast majority of the MakerDAO have opted to continue believing in the second-largest stablecoin in the world, ignoring all other feasible alternatives.
USDC Depegged After SVB's Failure
The Silicon Valley Bank (SVB), one of the biggest banks in the United States and a significant banking partner of Circle, the business that issues the USDC stablecoin, collapsed on March 10.
The following day, Circle issued a statement revealing that SVB had around $3.3 billion of the USDC reserves, which caused considerable worry among investors.
Circle gave a lot of assurances that the firm would pay any future deficits with personal funds, but such assurances were unable to counteract the unfavorable perception of USDC, which led to the stablecoin's depreciation from its $1 level. While USDC quickly regained its peg, the initial value drop to $0.87 raised serious concerns for Maker and other stablecoins and DeFi protocols.
MakerDAO Rejects The Proposal To Stray From USDC
The MakerDAO was compelled to assess its DAI reserves, which were all kept in USDC, in response to the depegging occurrence. This is due to the fact that the DAI token is essential to the Maker's multi-collateral lending operation. In addition, DAI also functions as the native stablecoin of the protocol.
The Risk Core Unit of the Maker protocol suggested on March 17 that the DAI reserves be diversified into other stablecoins, suggesting the Gemini Dollar (GUSD) and Paxos Dollar (USDP) as practical substitutes with fewer market risks. This would protect investors' holdings from future occurrences of similar depegging disasters.
On March 20, the MakerDAO conducted a survey in which it overwhelmingly rejected the plan, with 79.02% voting to "Keep USDC as the Principal Reserve" and only 20% voting in favor of diversification. These poll findings are greatly appreciated, especially since that many investors are losing faith in the USDC.
With a TVL of $7.65 billion, the Maker protocol is still the second-largest DeFi platform available. It was first introduced in 2017 and is regarded as the first successful DeFi experiment to date.
Current Crypto Market Situation
Presently, it looks that the whole cryptocurrency market is in a bearish trend, with the majority of assets having experienced a weekly loss. For instance, according to data from Coingecko, losses of 1.8%, 4.0%, and 9.9% in the last seven days were experienced by Ethereum (ETH), Binance Coin (BNB), and Matrix (MATIC), respectively. Bitcoin, on the other hand, has managed to hold steady, increasing by just 0.9% within the same time frame.
Nonetheless, several tokens have recently managed to go on an impressive ascent. For instance, as confidence about the Ripple v. SEC court case continues to rise, with a decision anticipated in the first half of 2023, Ripple (XRP) has earned an overall profit of 18.0% in the most recent week.