The prices for MKR, an Ethereum-based governance sign, rose to their highest level in more than two years on Wednesday.
MKR was trading at $ 1,068.53 at press time, up 44% over the past 24 hours. However, it was trading at $ 1,251.14 earlier in the day, near the January 21, 2018 record of $ 1,798.70.
Analysts told CoinDesk the recent rally was just a delayed and long-awaited result of the rapid growth of the decentralized financial sector (DeFi). MKR is the governance token for both Maker’s decentralized credit platform and the decentralized autonomous organization MakerDAO.
Yan Liberman, co-founder of Delphi Digital, a research and consulting boutique specializing in digital assets, attributed the price recovery to the sharp increase in supply of dai, the indigenous stablecoin for MakerDAO.
Dai is created when users of the Ethereum blockchain deposit one of many assets into the Maker Protocol and borrow it in the form of dai against that asset. On the other hand, the MKR grants its owners voting rights for the development of the Maker Protocol and of dai.
Compared to last year’s scorching “DeFi Summer” when MKR’s price remained “dormant”, the token’s fundamentals have improved over the past year, leading to demand for it, according to Ryan Watkins, a research analyst at Messari has led.
“In the beginning MKR did not generate any income [dai’s growing demand] because the interest rate for users who borrow dai was 0%, “Watkins told CoinDesk. “But later in the summer and early fall, Maker was able to raise interest rates, which resulted in MKR generating a lot of revenue.”
Denis Vinokourov, head of research at London-based prime brokerage Bequant, said a recent approval of a vote to raise debt ceilings (where a user deposits collateral and generates data on a variety of vaults) could have contributed to the rise in prices.
Analysts also said the rally may have been triggered by the current bull market.
“The latest excitement in the industry provided the recipe for this [MKR’s value] to finally be recognized, “said Watkins.