Why did MakerDAO’s annual profit increase threefold in the past three months?

Author: Ouroboros Capital, a cryptocurrency hedge fund; Translator: Blocking0xxz

MakerDAO’s token MKR has recently performed well, and I believe it may double. Has anyone noticed that MakerDAO’s annual profit in the past three months has quietly tripled?

Although the price performance of MKR is better than that of its competitors, the absolute value of the increase in MKR price is more than 60% compared to the tripled profit.

In other words, the P/E multiple is actually decreasing, which is good news for MKR.

The recent surge in revenue is mainly due to the increase in stability fees (fees charged to DAI borrowers) and the more effective allocation of assets on the balance sheet to US Treasuries/investment-grade bonds and other areas.

As we continue to see effective reallocation of assets on the balance sheet, fees may continue to rise in the coming months.

I don’t know why okenterminal hasn’t noticed this, but this may also be the reason why it hasn’t caught the attention of crypto tweets.

But someone is definitely paying attention. Despite the long US weekend, 80,000 (70 million US dollars) of MKR spot trades were made on Binance in the past 3 days.

It may be real money, as we have also observed some new wallet accumulation. It is likely to be a US fund.

Another indicator we are closely monitoring is the market capitalization of DAI. The increase in DAI’s market capitalization will double the profit potential of MKR. Because after the adjustment of stability fees and bond allocation, the profit of each unit of DAI for MKR is gradually increasing.

It can be compared to how banks increase profitability in an environment of rising interest rates. Although paying more interest to depositors, the size of interest income from loans is still greater than that of depositors. As net interest income (NIM) increases, profitability also increases.

MKR is taking measures to pay DAI holders a higher Dai Savings Rate (DSR), but their income growth rate is greater than the rate of payment. Therefore, their profitability has significantly increased.

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