DeFi lending platform Maker’s governance community, MakerDAO, has voted to preserve the DAI stablecoin’s primary reserve asset as USD coin (USDC).Despite USDC’s temporary depeg earlier this month, the vast majority of MakerDAO participants have decided to keep their faith in the world’s second-largest stablecoin.Silicon Valley Bank (SVB), one of the largest banks in the United States and a major banking partner of Circle, the issuing business of the USDC stablecoin, went bankrupt on March 10.
When Circle announced the next day that $3.3 billion of the USDC reserves were locked up at SVB, investors freaked out. Despite Circle’s reassurances that it will cover any deficits with its own funds, the persistently negative mood surrounding USDC ultimately led to the stablecoin’s depeg from the $1 mark. Although USDC quickly recovered its peg, its initial drop in value to as low as $0.87 caused widespread alarm among stablecoins and DeFi protocols like Maker.The depegging caused the MakerDAO to reevaluate its DAI reserves, which were previously kept in USDC. This is because the Maker’s multi-collateral lending business relies heavily on the DAI token. In addition, DAI is the protocol’s native stablecoin.
The Risk Core Unit of the Maker protocol advocated on March 17 that the DAI reserves be diversified into other stablecoins, suggesting the Gemini Dollar (GUSD) and the Paxos Dollar (USDP) as feasible alternatives with lower market risks, to protect investors’ money against potential depegging debacles.
MakerDAO members voted 79.02% to “Keep USDC as the Principal Reserve” in a poll on March 20, with only 20% in support of diversification. Especially now, when many investors’ faith in USDC has been damaged, these poll findings are very much appreciated.
With a total market capitalization of $7.65 billion, Maker is the second largest DeFi platform behind Ethereum. It went live in 2017, and many people consider it the first truly successful DeFi endeavor. Most crypto assets have lost value during the past week, suggesting a pessimistic trend in the cryptocurrency market. Coingecko reports losses of 1.8%, 4.0%, and 9.9% for Ethereum (ETH), Binance Coin (BNB), and Polygon (MATIC), respectively, over the past week. Bitcoin, meanwhile, is holding its own, albeit barely, with a 0.9% increase over the same time period.
Certain coins, however, have accomplished an impressive increase in the past few days. While investors anticipate a verdict in the Ripple vs. SEC court case in the first half of 2023, XRP (Ripple) has seen its value rise by 18.0% in the last week alone.