MakerDAO has liquidated some of its vaults to reduce risk and exposure to bad debt
Whales continue to show interest in the token despite the TVL dropping

After the FTX debacle, many in the crypto community have placed their trust in DEXs. It is against this background that MakerDAO announced that it will liquidate multiple vaults to minimize risks.

Read MakerDAOs [MKR] Price prediction 2022-2023

Not a risky venture

In a tweet, MakerDAO explained his plan to liquidate the USDC-A, USDP-A and GUSD-A vaults. This is only done for vaults with a collateral ratio of less than 101%.

A safe with a security ratio of less than 101% is considered “bad debts” for the protocol. Even though MakerDAO’s exposure to this kind of bad debt is relatively low, the MakerDAO team decided to reduce exposure to be safe.

In addition to the vaults mentioned above, other vaults with a collateral ratio of less than 101% would also be liquidated. In fact, according to the Twitter thread, MakerDAO will suffer a loss of 1.5 million DAI as a result of the liquidation event, which is less than 2% of its current system surplus.

MakerDAO also stated that this DAI debt will not pose a major threat to MakerDAO’s protocol financial health.

MakerDAO stands firm efforts to reduce the risk exposure for their users may be one of the reasons why big investors and whales were observed to be interested in $MKR.

According to Whale statisticsFor example, MKR was one of the most used smart contract tokens in the top 1000 ETH whales on November 24.

In fact, at the time of writing, Ethereum’s whales were holding up $43 million in $MKR Coins.

However, the activity on MakerDAO continued to fall. As can be seen, the number of daily active addresses has dropped significantly in recent days. Another indicator of lack of activity is the declining rate of MKR, which also decreased over the same period. A decrease in speed indicates that the number of times MKR has been exchanged between addresses has decreased.

In addition, MakerDAO’s network growth also declined, implying that the number of times new addresses ported MKR for the first time had dropped.

Source: Sentiment

In the DeFI space, MakerDAO’s TVL plummeted.

However, the revenue generated by MakerDAO is up 23.17% in the past 30 days. According to data, the number of transactions increased by 200% during the same period provided by Messari.

Source: Messari

This post MakerDAO’s removal of bad debt could be a good thing for users

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