MakerDAO, the governing body of the Maker Protocol, has witnessed a fall in its revenue in the third quarter of 2022 due to a fall in loan demand and few liquidations while expenses have remained high, as reported by Cointelegraph.
According to Cointelegraph, through an October tweet by a Messari analyst and co-author of “The State of Maker Q3 2022” Johnny_TVL, he mentioned that the decentralised autonomous organisation saw its revenue plunge to just over four million dollars in Q3, down 86% in comparison to the previous quarter. One of the results of this has been MakerDAO’s first quarter of net income loss since 2020.
On the basis of information by Cointelegraph, the Messari analyst has made the point of few liquidations and weak loan demand as reasons behind the fall in revenue. Reportedly, Ether and Wrapped Bitcoin (wBTC) didn’t perform well in the last quarter with revenue from ETH-backed assets falling 74% and revenue from BTC-oriented assets falling 66%. Borrowers make use of these cryptocurrencies as collateral for loans of the Dai stablecoin, through security assurance from the volatility seen within cryptocurrency markets at the cost of interest paid on the loans. The analyst also made the point around fall in collateral ratio of MakerDAO, suggesting the ratio has decreased to 1.1 from 1.9 at the same time last year. However, a report showed that the expenses have stayed high in the quarter at $13.5 million, falling 16% from the previous quarter.
Moreover, Cointelegraph noted that MakerDAO took steps to increase returns on assets its keeps as collateral, having conducted a proposal to invest $500 million in treasuries and bonds. It is believed that MakerDAO will provide this protocol with low-risk additional yield. The growth in Real World Asset (RWA) backed loans was also positive for MakerDAO, which reportedly accounts for 12% of its total revenue after rolling out its largest RWA-backed loan to Huntingdon Valley Bank (HVB) in the third quarter of 2022.
(With insights from Cointelegraph)