The recent deal between MakerDAO and Aave has raised concerns about the risk exposure of DAI's reserve assets. The deal will extend to 600 million DAI, exposing 12% of the reserve assets to risk. This move has been criticized as reckless by some experts in the DeFi sector.
However, the deal will be extended to 600 million DAI over time, exposing 12% of DAI ’s reserve assets to risk. In February, the synthetic dollar raised eyebrows. It was outrightly marketed as a ‘stablecoin,’ offering a high yield of 27%, tipping users to call it the next TerraLuna. These holdings include staked ETH and short ETH hedges heavily relying on CEX (centralized exchanges) liquidity. Unfortunately, USDe design faced several risks. CEXes could go under like FTX did.
Additionally, Funding Rates could flip negative during bear markets, affecting short ETH hedges. Even so, the recent deal with MakerDAO raises similar concerns across the DeFi sector. 'Eventually, that turns negative, funding becomes negative, margin/collateral gets liquidated, and you have an unbacked asset.' acknowledged. Apart from Aave, it remains to be seen whether other protocols will re-adjust their risk mitigation to MakerDAO’s alleged 'reckless' move
Makerdao Aave Defi DAI Risk Exposure Reserve Assets Reckless
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