The Rise of DeFi-native Loans
The latest data from MakerDAO’s revenue matrix shows that crypto-backed loans are now the biggest revenue contributor for the DeFi protocol. These loans make up 50.1% of MakerDAO’s projected $243 million annual revenue. This is a significant shift, as last year the protocol focused on real-world asset (RWA) vaults. Crypto-backed lending currently stands at $2.4 billion and is projected to generate $122 million in revenue, surpassing the RWA vault’s estimated $107 million in annual revenue.
A Return to Familiar Territory
Crypto lending has always been Maker’s main revenue driver. Before the push for RWA, DeFi-native lending brought in up to $200 million in annual revenue during the previous peak period in 2021. However, DeFi lending suffered during the recent bear market, which saw major crashes like the Terra Luna collapse and the FTX blowup. Maker and other protocols that played it safe managed to weather the storm, while smaller players struggled or closed down entirely.
The Comeback of Crypto Loans
With the market renaissance of last year and the doubling of crypto’s market capitalization to $1.7 trillion, crypto loans are now making a comeback. This growth indicates a return of appetite for risky long bets on future crypto prices. The surge in demand for crypto-backed loans suggests that sentiment has flipped bullish and traders need more loans to earn higher yields, characteristic of a bull market.
The Significance for Bullish Sentiments
Maker loans its DAI stablecoin, which is a major liquidity driver for trading. The fact that more than half of Maker’s revenue comes from crypto loans indicates a bullish sentiment among traders who are seeking higher yields. This suggests that market participants are expecting rate cuts by the US Federal Reserve and see little reason to invest in US treasury bills when DeFi rates offer double-digit yields.
Maker’s Earning Potential
Regardless of whether DeFi rates are higher or lower than US-fed interest rates, MakerDAO’s earning potential remains strong. The protocol’s recent injection of $100 million worth of RWA through BlockTower Andromeda shows its commitment to increasing investment in RWA and decentralizing its DAI stablecoin backing as part of its “Endgame” plan.
Hot Take: The Return of Crypto-backed Loans Signals Bullish Sentiments
The resurgence of crypto-backed loans as MakerDAO’s biggest revenue contributor is a clear indication that bullish sentiments are on the rise. As the market recovers and traders seek higher yields, the demand for these loans has increased. This shift in focus from real-world assets to crypto loans demonstrates the renewed confidence in the crypto market and the potential for further growth in the DeFi sector.
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