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DAI - finally some stability

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Satoshi&Co Daily Crypto Newsletter

May 30 · Issue #186 · View online
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Check out past issues of the newsletter along with more interesting crypto content as well as our recently-launched podcast series with leading crypto industry participants at our newly-launched website www.satoshiand.co

(Listen to our latest podcast here. It is with Sandeep Nailwal of Matic Network, which is a layer 2 protocol working on ETH’s Plasma. Matic Network recently finished a successful launch on Binance Launchpad and is also the first Indian crypto startup to receive funding from Coinbase Ventures).
DAI has been in the news a lot lately. We covered DAI’s monetary policy a while ago, as well as arbitrage strategies around DAI.
DAI is exciting for a variety of reasons, including the fact that it is foundational to the DeFi stack.
DAI prices kept falling below the Dollar for the longest time, as Ethereum prices started increasing in line with the broader crypto market over the past couple of months. There has been selling pressure on DAI, with the result that it has been a struggle to keep the price of the stablecoin pegged to the Dollar. There have also been rumors of internal misalignment within the team, in addition to the DAI trading a discount to its fair value due to rapid supply expansion. The high inventory levels saw DAI being sold at a discount to $1, with the discount sometimes as high as 2-3%.
This is the key point; In a bullish ETH environment, traders are incentivized to borrow more DAI as it allows them to gain leveraged exposure to ETH. DAI liquidity is more likely to contract when the stability fees, effectively the borrowing costs, are high enough and offset the profit potential from a leveraged ETH position. In order to counter the supply overhang, MKR holders agreed to raise the stability fees. However, most of the early fee hikes which started in February and continued until April proved futile, as the supply kept increasing and price discount widening. The succession of hikes resulted in the stability fees reaching as high as 19.5% from 0.5% at the beginning of this year.
Perhaps aided by the rally in ETH prices, resulting in users de-leveraging their ETH bets by paying back DAI, or due to the prohibitively expensive stability fees of close to 20%, DAI’s price peg travails seem to be easing up. This has resulted in supply contraction and subsequent price stability, at least in the short term, exactly as it would have done in traditional financial markets, in response to a Central Bank’s open market operations.The current DAI supply is 16% below the peak supply of 93 million DAI outstanding in mid-March.  
Source: Diar.com
Source: Diar.com
Source: coinmetrics.com
Source: coinmetrics.com
Source: coinmetrics.com
Source: coinmetrics.com
DAI will continue to play a critical role in the growth and adoption of DeFi for years to come. The recent listing of DAI on Coinbase should help push DAI awareness further. On the roadmap front, the launch of Multi-asset Collateral will diversify the risk away from ETH and allow users to borrow against a wide range of collateral assets. In tandem with the launch of Multi-asset collateral, MakerDAO also plans to launch a DAI savings mechanism where users can deposit their DAI tokens and earn interest on them, mirroring a traditional banking operation. This would put them in direct competition with key DeFi players such as Compound and Dharma that are using DAI to create lending markets.   
Meanwhile in Crypto Wonderland....
“Coinbase Adds EOS”
Coinbase added EOS to its retail platform and mobile apps. The move will provide market access to the cryptocurrency for millions of retail investors. EOS represents the largest altcoin added to the Coinbase retail platform since XRP was added this February. The cryptocurrency will be available to users in most jurisdictions, except for the United Kingdom and the state of New York due to tighter regulations. Coinbase.com had 27.9 million visitors in April with an estimated 25 million users as of Q1 of 2019. Coinbase has continued to aggressively list new crypto assets. Once considered the “conservative” crypto exchange stemming from the measured pace at which it added new coins, likely to adhere to more restrictive U.S. regulations. Starting late last year the exchange changed its strategy to list a greater number of coins.
“Coinbase Hints At Margin Trading”
For years, the global bitcoin margin trading market has been dominated by BitMEX, which at one point reached a daily volume of $10 billion on May 12, a new record high for the company. Now, Coinbase and Binance are looking to enter the market. The previous all-time high was reached in mid-2018 when BitMEX reached 1 million bitcoin in daily volume, equivalent to nearly $9 billion. Speaking on The Block’s podcast The Scoop, Coinbase Vice President of Business, Data and International  Emilie Choi has said the company is considering the addition of a margin trading feature on the platform.
“Huobi Taking Initiatives To Curb Wash Trading”
Huobi Global said it does not engage in any wash trading, and has taken steps to discourage such activity in the wake of a report implying the crypto exchange reported fake trading volume. Livio Weng, CEO of Huobi Global, told CoinDesk through a spokesperson that the exchange “is not involved in any wash trading,” and any such actions would go against the exchange’s “core values.” A report by Bitwise Asset Management which implied that Huobi reported inflated trading volume “surprised” its team, he said, and the exchange “subsequently did a thorough check and review of our system.”
“Rakuten Partners With Blockchain Security Firm”
A subsidiary of Japanese e-commerce giant Rakuten, Rakuten Wallet, has partnered with blockchain security firm CipherTrace to assure Anti-Money Laundering (AML) compliance for the company’s upcoming crypto exchange. The development was announced in a press release shared with Cointelegraph on May 29. CipherTrace — which develops cryptocurrency AML, forensics and regulatory monitoring solutions — will work on improving the safety of Rakuten Wallet’s investors as well as the protection of the integrity and compliance of the exchange.
Tweet of the Day
Denis Nazarov
1/ Crypto has the potential to be the most social, inclusive, liberating, challenging, optimistic, and revolutionary technology wave to date.

This is why I believe the next gen of devs and CS students will choose crypto as their area of focus, over popular disciplines like ML👇
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