What's Driving Token Prices? August 9, 2023

MKR (-8%) - On Monday, decentralized stablecoin issuer, MakerDao, saw an influx of deposits into its Dai Savings Rate product (DSR). This increase came following the rollout of a new rate (the “EDSR”) which offers 8% yield on DAI deposited in the DSR, up to 20% utilization (about $200m). The rate is temporary and is designed to increase the circulating supply of DAI (which dropped at the end of last year) and raise cash so Maker can use the DAI to purchase more RWA assets. The interest rate paid comes directly from Maker's accumulated revenues. The influx of DAI was also driven by an arbitrage opportunity on Maker’s lend/borrow protocol, Spark, which offered DAI loans at about 3% allowing users to borrow DAI from Spark at and deposit it into the DSR to earn 8%, netting ~5% spread. As of Tuesday morning, a forum post from the founder, Rune Christensen, suggested lowering the rate to 5% and also raising the rate to borrow DAI on Spark from 3% to 5% thus reducing the potential arb opportunity. These modifications are still in governance discussions but the DSR will automatically decrease since utilization is above 40%. Maker has seen over $500M in DAI inflows since Monday.
GFI (-4.8%) - Goldfinch, a decentralized lend/borrow protocol that services emerging markets small businesses, experienced its first default this week on a $5M loan equating to about 4% of TVL. According to user accounts and governance posts, the DAO knew about the issues with this particular issuer since December but had not been able to do anything until the borrower officially defaulted on the loan. The borrower failed to make interest payments although they had previously breached their covenants.
GMX (-0.04%) - Decentralized perpetual swap trading platform, GMX, launched its v2 version last week. The update aims to improve a number of issues with GMX’s v1 including lowering fees to compete with dydx; implementing price impacts when previously there was no slippage leading to exploits; adding funding fees to balance the mismatch in open interest (as the “borrowing fee” used previously did not lead to to the rebalancing the pools via arbitrage); and also changed the structure of the GLP to offer better liquidity and protections from volatility. GMX made a splash with their original product late last year, stealing market share from dydx but has since cooled off. GMX is currently the fourth largest decentralized derivatives exchange by volume, however, volumes have seen a slight increase of 1% WoW. It will likely take some time for the impact of the v2 upgrade to reflect GMX’s fundamentals.
CRV (+4%) - An update following last week’s hack and threat to CRV price: since last Wednesday, two additional OTC deals were done where Curve founder, Egorov, sold around 106M CRV tokens for about $0.40 each (market price currently is $0.60). Tokens were sold to DeFi investors and protocols such as Gnosis Chain, Reserve Protocol, DFW labs, market-maker Wintermute, Justin Sun, DCF God and others. There has also been a proposal from Aave governance to purchase $2M of CRV for its treasury to better align incentives (still under discussion). Finally last Friday, the hacker agreed to return funds to Alchemix and JPEG’D, two of the protocols impacted, along with a return of partial funds to Curve (all in exchange for bounties). As the hacker did not return all funds, Curve turned over their bounty of $1.8M to the community for whoever could identify the hacker in any way that could lead to their arrest and recovery of assets.

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