MakerDAO’s Fundamentals Will Boost MKR Higher: Analysis

MakerDAO’s fundamentals will boost the token higher after the market-wide correction as the past few weeks were tough for all leading decentralized finance coins as we saw in our altcoin news.

Maker, the native token of the MAkerDAO protocol was outperforming most of the other coins but it was down by 5% from its recent highs a few weeks ago. This means that the ETH-based coin is underperforming Ethereum after it dropped about 28% and BTC after it dropped about 14%. There could be a reason why MKR is one of the best performing altcoins even though it crashed by 35% from its recent highs.

MakerDAO is now generating $27 million in annualized earnings for token holders – the most of any DeFi protocol.

Implies a ~19x forward earnings multiple. https://t.co/EHU2cnXGAm pic.twitter.com/JlqT7KUAcn

— Ryan Watkins (@RyanWatkins_) October 5, 2020

MakerDao’s fundamentals are still set to boost the cryptocurrency higher. Ryan Watkins, the analyst from Messari reported that the blockchain is generating $27 million worth of annualized revenue for the MKR holders as it increased the interest rates on its decentralized loans, therefore, allowing the value to accrue in the token for the first time in months. MakerDAO buys back the MKR tokens with protocol revenue which is later generated via the protocol interest rate. With the recent monetary policy shift, MKR trades at 19 times forward earnings multiple as Watkins said:

 “I’m personally skeptical token buybacks and burns are the best way to distribute value to token holders, and believe Maker is challenged longer-term. But no doubt Maker is demonstrating its ability to capture value from Dai growth.”

The ratio is higher than it was before because of the increase in stability fees coupled with the strong increase in debt. Chris Burniske, the partner at Placeholder Capital, is one of the few MKR bulls during the ongoing trends in the decentralized finance space who said:

People mostly sleeping on $MKR while utility goes through the roof, and conversations abound around its value capture model.”

As previously reported, The decentralized finance space has seen huge growth over this year but Maker which was strongly tied to Defi, underperformed. The cryptocurrency relative to the competitors is underperforming unlike Aave’s LEND and the SNX token which surged hundreds of percent this year alone. MKR only saw a 20% move higher. The market could be changing its mind however as Maker surged by 7% when the stability fees were introduced which seems to be poised for more growth as the fundamentals of the underlying MAkerDAO protocol aligned in favor of the growth.