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MakerDAO Considers $600 Million DAI Allocation into USDe and sUSDe

MakerDAO is presently assessing a proposition to allocate $600 million in DAI towards USDe and its staked variant, sUSDe. As per a discussion on a community forum by MonetSupply from Block Analitica, a risk intelligence entity specializing in decentralized finance (DeFi), the intended investment intends to harness the capabilities of the DeFi lending protocol Morpho Labs.

The objective of this allocation is to leverage the advanced lending features offered by Morpho Labs, in line with MakerDAO’s strategy for diversifying investments and its dedication to fortifying the DeFi ecosystem by extending targeted support to Ethena Labs’ stablecoins.

MakerDAO’s Reasons to Invest in USDe and sUSDe

The post indicated that users displayed a preference for specific types of financial products and leverage options within the DeFi sphere. “Users demonstrated a strong inclination towards USDe over sUSDe pools, as well as a preference for higher leverage over lower leverage,” stated MonetSupply.

Furthermore, the proposal elaborates on the financial and strategic advantages of the allocation, asserting, “There will continue to be significant incentives for utilizing USDe and sUSDe collateral on Morpho.”

By allocating to USDe, liquidity risk is mitigated through instant redemption, bolstering Ethena’s insurance fund revenue and enhancing MakerDAO’s investment security over time.

MonetSupply contended that as the DeFi landscape evolves, Ethena’s position and forthcoming developments, such as the revised points program (‘sats’ program), will “persistently favor USDe over sUSDe.”

Lastly, the proposal underscored the broader implications of the investment for the DeFi ecosystem, affirming, “Allocating to USDe also enables Ethena to retain a larger portion of revenue for their insurance fund, consequently improving the risk profile of Maker’s Ethena allocation.”

Initial $600 Million Allocation with $1 Billion Cap

The initial proposed recommendation suggests that MakerDAO’s exposure to USDe should be capped at $600 million, a threshold that might expand as Ethena’s platform expands.

The post advocates that the investment should not only cover MakerDAO’s operational expenses and anticipated losses from USDe but also adhere to a secure investment ceiling of up to $800 million to safeguard against significant losses and maintain financial stability.

“We advise restricting allocations to a maximum of 600 million DAI collectively for the time being,” stated the analyst.

“However, we propose setting the DDM line parameter to 1 billion DAI to streamline the governance process required for future exposure adjustments should relevant constraints evolve,” concluded MonetSupply.

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