Stablecoins have become an important foundation for the cryptocurrency sector as they serve as a highly liquid base pair for most assets and also provide investors with a safe place to earn profits. Data also shows that stablecoins play an important role in functioning as a gateway for capital inflows to the crypto ecosystem.
While the largest stablecoins in the market are currently monitored and issued by centralized entities such as Tether or Circle, DAI and its issuer Maker (MKR) is a stablecoin project that adheres to the ethos of decentralization on which the cryptocurrency community is based.
Data from Cointelegraph Markets and TradingView shows that the price of MKR is up nearly 100% over the past week, from a low of $ 2,011 on April 7 to a new high of $ 4,096 on April 15 on rising trading volume.
Momentum for MKR has increased as an ecosystem in recent weeks thanks to a focus on making the protocol fully decentralized and community-driven.
Governance has emerged as one of the sought-after features in the 2021 bull market as part of the wider decentralized finance (DeFi) movement, and MakerDAO offers one of the most active governance experiences in the crypto sector.
As the community prepares for full decentralization, these are the key components of creating a self-sustaining MakerDAO: https://t.co/BgrvGUvci2
– Maker (@MakerDAO) April 3, 2020
Holding MKR is required to participate in the governance of the protocol and the increasing number of board proposals to vote on has led to increased demand for MKR, driving the price higher.
Demand for DAI increases Maker’s price
As mentioned earlier, one of MakerDAO’s primary tasks is to drive the DAI stablecoin, which has seen significant growth in its overall offering in 2021 as the algorithmically driven stablecoin got better at maintaining its peg to the US dollar .
The growth in DAI’s offering is due in part to its use in a number of DeFi protocols, including AAVE, Compound (COMP), and Cream Finance (CREAM) as the go-to option for a decentralized stablecoin.
New DAI is created by locking collateral such as Ethereum (ETH) or ChainLink (LINK) in a MakerDAO vault and generating DAI against it.
Because of this mechanism, the rising DAI offerings coincided with an increase in the total value locked (TVL) in the Maker protocol, making the project the second-ranked DeFi protocol behind Compound, which has a $ 9.28 TV. billion.
As the TVL on MakerDAO steadily rose alongside the rising supply of DAI, fundamental indicators, including increases in social media activity, began to signal an impending price move.
VORTECS ™ data from Cointelegraph Markets Pro began detecting bullish outlook for MKR on April 13, ahead of the recent price hike.
Exclusive to Cointelegraph, the VORTECS ™ Score is an algorithmic comparison of historical and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.
As can be seen in the chart above, the VORTECS ™ score for MKR climbed the green on April 12, reaching a high of 80 on April 13, about 31 hours before the price rose 65%.
With altcoins moving again and the DeFi sector heating up, as evidenced by the rising TVL in the ecosystem, MakerDAO could rise further as it is the best choice for investors looking to interact with Ethereum network-based DeFi protocols.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade move carries risks, you should do your own research when making a decision.