DAI-stressed MakerDAO struggles as users look toward other stablecoins

ambcrypto.com:

While its DAI stablecoin regained its parity with the U.S. dollar last week, increased uncertainty as to whether a further de-pegging should be expected resulted in a decline in MakerDAO’s [MKR] total value locked (TVL) in the last seven days. 

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According to data from DefiLlama, the protocol’s TVL was $7.68 billion at press time, having decreased by 5% in the last week. The decline in MakerDAO’s value of assets was attributed to a drop in the number of collateralized loans on the protocol, as concerns grew over the viability of the DAI stablecoin.

This also culminated in a fall in DAI’s supply. Per data from Maker Burn, since 13 March, DAI’s supply fell by 13%. As of this writing, the stablecoin’s supply stood at 5.6 billion DAI tokens. When DAI supply drops, there are fewer DAI tokens in circulation, which could result from a decline in demand, as seen in the last week.

Source: Maker Burn

As DAI’s supply fell in the last week, MakerDAO’s annualized fee income also declined. Maker fees generate income when users open a Collateralized Debt Position (CDP) and generate DAI. The DAI is then paid in the form of the MKR token. 

When users generate DAI by locking up collateral in a CDP, they are charged a stability fee, which is interest paid in DAI to the protocol. This stability fee is then converted into MKR and distributed to token holders as a form of fee income.

If the DAI supply declines, it means that fewer users are generating DAI by opening CDPs, which can cause a decrease in the stability fees collected by the MakerDAO protocol. This, in turn, can result in a decline in the amount of MKR tokens distributed as fee income.

According to Maker Burn, since the