MakerDAO: What is the possibility of MKR continuing its near 64% rally?

An Introduction to MakerDAO

The crypto markets are extremely volatile and MakerDAO is here to address this issue. It is a smart contract platform with a new-generation blockchain-based banking system built on Ethereum that enables faster and more secure cross-border payments with ease. It is basically a peer-to-contract lending platform that allows for over-collateralized loans backed by ETH and issuing its stablecoin DAI, which is pegged to the USD. 

MKR, the native token of MakerDAO, serves as a utility token, a governance token, and a source of capitalization for the MakerDAO ecosystem. It can be used to pay fees or send/receive funds via an ETH account. 

Recent Updates:

• The Maker DAO community unanimously votes to allocate $500 million to U.S.Treasuries & corporate bonds to combat the ongoing bear market.

Maker Governance executed the first DAO balance sheet investment in high-quality bonds.

MIP65: Monetalis Clydesdale will activate a Maker Vault for the purpose of investing PSM’s USDC in liquid bond strategies with a debt ceiling of 500 million DAI. pic.twitter.com/LlpBUkYXxE

— Maker (@MakerDAO) October 6, 2022

• In the virtue of stabilizing the fees, keeping them unchanged until December 31, 96.6% DAO community voted in favor of the latest Parameter Changes Proposal. 

As a set of forward guidance commitments on future changes, the MakerDAO Open Market Committee noted that ETH-A, ETH-B, ETH-C, WBTC-A, WBTC-B, WBTC-C, WSTETH-A, and WSTETH-B Stability Fees should not increase through December 31. https://t.co/gFCtAxSU8x

— Maker (@MakerDAO) October 7, 2022

Read more: Top Stablecoins 2022

Technical Analysis of MakerDAO (MKR)

Source: Tradingview

• After the MKR price dropped hard from above $1000, it held on its horses to ignite a fine parabolic recovery back to a 4-digit figure very soon.
• A 100% upswing from the past couple of weeks substantiates the claim of the token being self-assured of another upswing of 50% to reach the pivotal resistance.
• However, the levels between $1159 & $1193 could hinder the rally, but after a brief pullback, the MKR prices could bounce back towards $1500.
• The RSI has struck the overbought levels, while MACD continues to be somewhat bullish & an Awesome Oscillator is flashing ‘buy’ signals.
• While most of the technicals point out the growing strength of the bulls, the prices are expected to surge withstanding any interim pullbacks.

With the technicals out of the way, let’s take a look at a few on-chain metrics to see if they corroborate with the observations made above.

Sustained Supply on Top 100 Addresses

Source: Coincarp

The holdings of the top 100 addresses signify the state of the whales during the ongoing market trend. While the top address continues to hold and accumulate regardless of the current market condition, it may indicate the market fractals may change in the coming days. Hence, the inflow and outflow of the top 100 addresses are closely monitored, which indicates the probable direction of the upcoming trend. 

In the past 7 days, the top 3 addresses, which collectively hold nearly 31% of the total MKR supply, have not added any new tokens to their holdings. The MKR DAO governance contract holds 19.11% and has liquidated nearly 1000 MKR. The second largest address is managed by MKR MCD Pause Proxy and has shed 537 tokens. While the other address has either held their holding or sold a significant amount of MKR but has not added up to their treasury, 

Hence, this may indicate the whales may have begun extracting their profit, which may end up in a significant leg down soon.  

Valuation metrics indicate high premiums on MKR

Source: Santiment

MVRV, or mean value to realized value, indicates whether the token is overvalued or undervalued at the moment. While the ‘Fair Value’ is derived by calculating the difference between the two, it is denoted by the MVRV-Z score. Meanwhile, the NVT, or Network to Transaction Ratio, is defined as the ratio of market capitalization divided by transaction volume. 

The MVRV ratio and the NVT ratio are currently rising rapidly. A rising MVRV ratio suggests that the token is currently overpriced and may decline over the next few days. A rising NVT ratio indicates that the token’s value is increasing despite the lower activity. Therefore, it could experience a decline at any time in the near future. 

As a result, the above ratios indicate that Maker crypto may fall very soon, as the current upswing is merely a short-term bounce. 

Additional Read: Top DAO Projects

Conclusion

For the past week, the Maker DAO price has been rising noticeably, and it is anticipated that this trend will last for quite some time. However, the technicals and on-chain metrics contradict expectations as the bears maintain a firm grip on the rally.  

Price movements, whale holdings, rising ratios, and other indicators all point to an interim bounce that will ease in the coming months. Therefore, it would not be unfair to say that Maker DAO price may continue to rise for a while before experiencing a sharp decline. 

Prices as on 11 October, 2022.