MakerDAO - A Decentralized Financial Ecosystem - Technical + Fundamental Analysis

By chrispop | Chris "El Rey" TA series | 19 Jun 2019

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There is no doubt that MakerDAO, together with its two tokens MKR and DAI, has been making some big waves in the cryptocurrency land recently. And I'm confident that after you read this article you will convince yourself why!

Fundamental Analysis

I want to start by analysing some of the factors that drive the intrinsic value of the MKR token. First of all MKR is a governance token, that means it confers voting power to the owner inside the Maker ecosystem. In other words MKR holders have a direct Risk Management role which is imperative in a financial system.

Some of the actions that holders have voting power on:

  • Add​ ​new​ ​CDP​ ​type
  • Modify​ ​existing​ ​CDP​ ​types
  • Modify​ ​Dai Savings Rate 
  • Choose​ ​the​ ​set​ ​of​ Price Oracles
  • Choose​ ​the​ ​set​ ​of​ ​Emergency Oracles
  • Trigger Emergency Shutdown

Stability Fee

Personally this point excites me the most: "It is an annual percentage yield that is calculated on top of the existing debt of the CDP and has to be paid by the CDP user. The Stability Fee is denominated in Dai, but can only be paid using the MKR token. The amount of MKR that has to be paid is calculated based on a Price Feed of the MKR market price. When paid, the MKR is burned, permanently removing it from the supply."

The stability fee is now 16.5% that means for every $100 1-year loan, $16.50 will be injected into the market creating buy pressure on MKR. That's a great thing if you ask me. Remember that MKR has a supply of only 1,000,000.

MKR >< DAI

As you have probably noticed, the MKR value is strongly correlated to the adoption and utility of the stablecoin, DAI. A recent report on Maker's official blog published on June 6th shows that the DAI economy is looking strong and the adoption has seen a steady raise over the recent months.

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source: https://blog.makerdao.com/dai-in-numbers-momentum-report/

Technical Analysis

Moving on to my favorite part of the review, technical analysis! Having a look at the weekly chart I can already tell that this token is bullish. We have been in an uptrend since December 2018, creating higher lows and higher highs. At the price is being held nicely above the 21 EMA and 10 SMA. However we have printed a long-legged doji so there is a bit of indecision in the market.

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Stepping down to a daily timeframe the PA is above all EMAs and they begin spreading which is a very bullish sign from my experience. We have an immediate horizontal resistance at the $770-$780 level and the support is standing strong at around the $600 psychological price tag which is also in confluence with the 200 EMA.

I see the blue box that I've drawn as a critical zone for MKR. If we manage to "impale" it, we have clear sky to go to the moon. Moreover you can clearly see that the price is being driven by a nice trendline support dating back from the end of 2018. Actually looking at the volume signature we might be forming an ascending triangle pattern whose break could get us to ~$1500.

Regarding the Oscillators, they don't look too well as both the RSI and Stoch are pointing down.

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I won't go lower on the timeframes as I don't see any other technical factors that could help you form a better picture of MKR. As a rule in trading, lower TFs are much more noisier then higher TFs and they should be used more for dictating your entry point.

CONCLUSION

Summarily, MKR is a high-quality token that stands at the core of an innovative decentralized financial ecosystem. From both the fundamental and technical parts the Maker token looks promising and with the growth numbers that have been published in the latest report on MakerBlog I believe that is a matter of time until we receive that $1500 mark.

Thank you for reading my analysis and if you have any suggestions, feedback or questions I highly encourage you to post them in the comments!

DISCLAIMER: This is NOT intended to be financial advice. The content in my articles strictly represents my personal technical analysis and views of the market.

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chrispop
chrispop

Professional Trader, Young and Ambitious Entrepreneur, Crypto Veteran & Enthusiast Investor, Passionate about Cars and Football


Chris "El Rey" TA series
Chris "El Rey" TA series

Technical analysis and outlooks on the crypto market realised by "El Rey", a seasoned trader who has been battle tested in the fire of both crypto and forex market environments.

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