Maker has gained 53.5% in the past month, and the cryptocurrency witnessed a remarkable 28.1% increase between July 15 and July 22, reaching its highest daily close in nearly a year. While the gains are impressive, the real question is: Can the cryptocurrency sustain its current trajectory, or were short-term factors behind the price pump?

MakerDAO, a decentralized autonomous organization (DAO) responsible for Dai (DAI) stablecoin and management token creator (MKR), presented a five-phase road map in mid-May. Titled “Endgame” upgrade plan includes a new blockchain, rebranding and the introduction of two tokens with updated features.

Rune Christensen, co-founder of MarkerDAO, revealed that the primary component of the “Endgame” is the development of incentive programs for interaction and participation in managing things based on a new chain connected to the Ethereum network. In principle, users will have the ability to initiate hard forks in response to brute force attacks or abuse.

Attributing the recent increase solely to these proposed changes seems simplistic, given that Maker’s price has remained stable for 30 days following the announcement. As a result, investors looking to understand the movement of MKR must dig deeper to identify the exact triggers behind the price increase.

Venture capital funds release MKR

According to crypto markets and decentralized finance analyst Naye, Paradigm Capital likely divested a significant portion of its investment in MKR in March. Additionally, A16z, another major venture capital firm that previously invested in Maker, has been reducing its position in recent weeks.

2/ The last two US-based VCs capitulated.

Paradigm unloaded their bags 4 months ago and the a16z is in the liquidation process right now. Interestingly, they even use the same desk to perform. Total disbelief.

Polychain and Dragonfly unloaded all theirs $ MKR years ago pic.twitter.com/DdsHs6gxzd

— Nay (@nay_gmy) July 15, 2023

While it is proving challenging to see if their selling pressure is waning, one of the most significant risks for Maker has always been secondary token sales to VCs since April 2019 at an average price below $250, representing 170,000 MKR.

According to Naye, Polychain and Dragonfly also shed their positions earlier, lending credibility to the rally based on expectations of more VCs to follow.

At the same time, Christensen reinforced his commitment to the project’s long-term performance by reducing positions in Lido DAO (LIDO) and increasing his stake in MKR, according to his public Ethereum address.

The buyback mechanism reduces the supply of MKR

Collateralized Debt Positions (CDPs) allow DAI to be borrowed from MakerDAO using crypto assets as collateral. The smart contract then issues DAI, allowing borrowers to use it freely.

The previous smart burning mechanism involved DAI burning when the CDP was closed. However, this presented a problem if many CDPs closed at the same time, leading to a shortage of DAIs.

Conversely, the new smart burning mechanism involves buying MKR from the market and burning it, independent of CDP closings. This allows MakerDAO to effectively respond to market changes and results in a reduced supply of MKR, which has a positive impact on its price.

Real-world assets increase protocol revenue

MakerDAO impressively increased its revenue by 343% in three months by reducing its dependence on USD Coin (USDC) stablecoin and, according to MakerBurn data, includes real-world revenue-generating assets. This shift included a reduction in the ratio of stablecoins from 62.4% to 20.2% in three months.

Unlike other stablecoins, DAI passes revenue to its holders through the DAI Savings Rate (DSR), which users can earn with a variable interest rate by putting DAI into a DSR contract.

Related: Korean banks are exploring stablecoin, an alternative to CBDC

While the increase in DSR has yet to reverse the trend in DAI supply, especially since its 3.5% return is lower than traditional fixed income investments offering 5%, the protocol’s higher savings rate increases the chances of maintaining its 4.5 billion DAI.

A pivot that could work

Maker appears well-positioned to sustain its rally thanks to the implementation of a buyback mechanism, a remarkable 343% increase in revenue, and reduced risk following the exit of VC strategies. In addition, strengthening the co-founder’s commitment by adjusting his shares in favor of MKR increases confidence in his future prospects.

Collect this article as an NFT preserve this moment in history and show your support for independent journalism in the crypto space.