Why Maker (MKR) Is Up 12% Today
KEY POINTS
- MKR fuels the minting of DAI, the main competitor of UST.
- DAI and UST’s competition with each other means their backing currencies could be affected by the other shifting in value.
- DAI is considered less risky than UST, making it a potentially preferable choice for investors during market plunges.
MKR jumps 12% in the wake of UST’s plummet. Will the safe bet win out?
As UST continues to slip further below its desired peg of the dollar, MKR, the cryptocurrency that fuels the creation of UST’s largest competitor, DAI, is rising in response. The competitive nature of UST and DAI potentially connects the value of these two stablecoins, as well as their backing cryptocurrencies, in an interesting way. When one coin falls, the other has the potential to rise. With DAI being considered the safer bet of the two competitors, MKR is seeing increased desirability during the market’s current crash.
Competing currencies
DAI and UST, which are two different types of cryptocurrency, have competed against each other fervently, each hoping to make the other completely obsolete. While UST has seen volatility, dropping from its desired value greatly and reaching a value of $0.62 recently, DAI has remained relatively stable, maintaining its dollar peg much better than its competitor. As MKR is the coin that powers the minting process of DAI, it is clear why this coin might jump as UST continues to decline. More and more investors in UST and its backer, LUNA, might lose faith in the riskier tokens, trading them in for safer, more secure investments. If DAI can continue to provide this stability, UST investors could flock to the competition. In the constantly shifting crypto market, stability is valuable to investors.
Competitive connection
The competition of these different types of cryptocurrencies seems to have linked their fates in an interesting way. If UST falls, DAI and MKR are given an opportunity to rise up. If UST and LUNA rise, DAI and MKR could be set up for a fall of their own. Through competition, changes on the values of these digital currencies could produce an inverse effect on the others. Investors who are unaware of the competition between these coins should keep their eyes peeled for changes among any tokens that are associated with this rivalry, as it could have large effects on the value of their own assets.
The bottom line
As UST continues to plummet, MKR sees a surge in difficult times. While we may not have seen the end of UST, some investors may take this opportunity to switch sides in the competition. DAI investors may not be getting the returns they are looking for out of DAI, and could seek a change of pace with UST while it is low. Meanwhile, UST investors could be tired of the constant ups and downs, opting for a more stable option. The fates of these two coins are connected through their contention for supremacy. Investors should keep this in mind when it comes to DAI, UST, MKR, and LUNA.
As the values of cryptos across the board fall, many wonder: Is crypto a good investment? Check out our investigation into that very question to find out if crypto investing is right for you!
Our Research Expert
Katie Clinebell is a freelance content creator and digital marketing strategist for FinTech, blockchain, and crypto brands. She has created award-winning campaigns for Snapple and Tai Pei Frozen Asian Food and received an Adobe Academic Achievement Award for content about Olympic athletes.
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