In the past October, the overall digital currency market fluctuated greatly. Affected by this, the secondary market was more active in short-term and swing bands. For the DeFi lending market, it will have a certain positive impact, because the current lending platform except In addition to the "financial management" attribute, it is more used for "leverage". The sharp market shocks will directly stimulate the increase in loan demand.
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1. MakerDAO’s borrowing rate drops to a low of 5.5%
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Figure 3: Changes in interest rates of mainstream lending platforms in 2019
After this sharp adjustment of interest rates, among the major mainstream DeFi lending platforms, Maker's borrowing rate has been far lower than that of dYdX and Compound. For Maker, lowering the interest rate can stabilize the price of DAI to $1 on the one hand, and on the other hand, it can stimulate users to mortgage more ETH, and then produce more DAI to stimulate the increase of DAI lending. In fact, according to data from DAppTotal, in October, the loan amount of DAI on the Maker platform was 20.98 million, an increase of 610,000 DAI compared with September. It can be perceived that the borrowing rate has an immediate effect on the market adjustment of funds.
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2. DAI with overflowing turnover rate becomes the king of DeFi circulation
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Figure 4: Distribution of Outstanding Loan Assets in 2019
However, as of now, the total market supply of DAI is 99.91 million pieces, and the total debt of DAI among the outstanding digital assets has reached 121 million US dollars. Why is there an overflow? According to DAppTotal data analysts, there are two reasons:
1) There is a large price difference between DAI when it is lent and when it should be repaid. For example, DAI borrowed at USD 0.96 needs to pay USD 1.04 when it is repaid, which in turn causes an overflow of the outstanding asset value of DAI;
2) DAI has been repeatedly lent out in cross-platform asset circulation. For example, Xiao Wang lent 1,000 DAI from Maker and deposited it in the Compound lending pool, and then quickly divided into 500 DAI and borrowed it by Xiao Li. The original 1,000 DAI formed the statistics of 1,500 outstanding assets .
The overflow of DAI in outstanding assets is enough to show that DAI has a high turnover rate and circulation utilization efficiency in market circulation.
As we all know, on November 18th, MakerDAO will launch multi-collateralized DAI. There is no doubt that DAI will become the hard currency for the circulation of major digital assets on lending platforms. At present, the 99.91 million DAI is close to the supply limit of 100 million. It is believed that as the market demand for DAI continues to increase, the supply of DAI will expand again. Because from another perspective, too much DAI overflowing in outstanding assets will have the risk of simultaneous withdrawal and redemption. It is believed that MakerDAO will have the next step to expand (increase the upper limit of DAI issuance). In fact, Maker has also issued 7.16 million DAI in the past month. In any case, DAI's dominance in the lending platform has been established.
Note: As of the time of publication, there has been news that MakerDAO is voting to further increase the DAI debt ceiling.
