MakerDAO Contemplates $600 Million DAI Investment in USDe and sUSDe
Written by Hongji Feng
Last updated: April 2, 2024 01:09 EDT
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1 min read
MakerDAO is currently evaluating a proposal to allocate $600 million worth of DAI into USDe and its staked version, sUSDe.
According to a post on a community forum by MonetSupply from Block Analitica, a risk intelligence firm specializing in decentralized finance (DeFi), the proposed investment aims to leverage the DeFi lending protocol Morpho Labs.
The allocation seeks to take advantage of the advanced lending capabilities of Morpho Labs, in line with MakerDAO’s goals of diversifying investments and supporting the growth of a resilient DeFi ecosystem through targeted support of Ethena Labs’ stablecoins.
MakerDAO’s Reasons for Investing in USDe and sUSDe
The post indicates that users have expressed a preference for certain types of financial products and leverage within the DeFi space. “Users have shown a strong preference for USDe over sUSDe pools, as well as a preference for higher leverage,” stated MonetSupply.
The proposal also highlights the financial and strategic benefits of the allocation, stating, “There will still be significant incentives for using USDe and sUSDe collateral on Morpho.”
Allocating to USDe would also mitigate liquidity risk through immediate redemption and increase Ethena’s insurance fund revenue, thereby enhancing MakerDAO’s investment security over time.
As the DeFi landscape evolves, MonetSupply argues that Ethena’s position and future development, including the revised points program (known as the ‘sats’ program), will continue to favor USDe over sUSDe.
Lastly, the proposal emphasizes the broader impact of the investment on the DeFi ecosystem, stating, “Allocation to USDe also allows Ethena to retain a greater share of revenue for their insurance fund, which can improve the risk profile of Maker’s Ethena allocation over time.”
Initial $600 Million Allocation with $1 Billion Cap
The proposed initial recommendation sets MakerDAO’s limit for USDe exposure at $600 million, a figure that may increase as Ethena’s platform expands.
The post suggests that the investment should not only cover MakerDAO’s operational costs and projected losses from USDe but also remain within a secure investment limit of up to $800 million to safeguard against significant losses and ensure financial stability.
“For the time being, we recommend limiting allocations to a maximum of 600 million DAI in total,” said the analyst.
“However, we suggest setting the DDM line parameter to 1 billion DAI to reduce the governance overhead required to increase exposure in the future if relevant constraints change,” concluded MonetSupply.
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