By Michael Scott
MakerDAO’s recent update reveals plans to allocate $750 million towards investing in the US treasury. The decentralized autonomous organization (DAO) responsible for issuing DAI stablecoin revealed plans to invest an additional amount in the US treasury.
Additional $750 Million to Tap the Favorable Yield Environment
The entity plan mirrors the $500 million investment in the US government notes and bonds. The proposal currently under review is set to leverage the prevailing favorable yield environment amid volatility in the crypto and conventional stocks sector. The approval of the resolution would facilitate the addition of another $500 million in October, raising the investment in Treasury instruments to $1.25 billion.
The suggested approach involves a six-month investment period to deploy the ladder strategy. MakerDAO is considering embracing the biweekly rollover indicating the notes acquired feature maturities of an equal split during the entire period. The decentralized autonomous organization (DAO) is considering utilizing a flexible strategy. Its use would enable MakerDAO to deploy a different ladder and tackle complex schemes.
Initial Investment in Treasury to Accomplish DAI Stablecoin Stability
DAOs operate as organized groups united to fulfill a particular idea. While the groups lack central leadership, they reach governance decisions through community voting. Decisions approved are executed using the software.
An update conveyed by the MakerDAO revealed that prioritizing the investment in US Treasury sought to facilitate DAI Stablecoin stability. Efforts to stabilize the stablecoin were inevitable following the discovery that DAI was overcollateralized. Shortly after, rival stablecoins would suffer a reputational hit following the sudden collapse of Terra UST stablecoin in 2022.
Laddering Treasury Investment in Half Year Period
The chief executive at decentralized finance (DeFi) Monetails, Allan Pederson, lauded the decision to implement the laddering of the US Treasury in six months. Laddering the Treasury investment within six months offered a strong and effective solution relative to other options within the liquid money market.
Pederson added that the laddering approach blended with biweekly maturity yielded tax efficiency and decreased cost. The approach did not compromise the inherent liquidity since Treasury maturity matched the laddering.
Pederson observed that MakerDAO anticipates its strategic partner Block Tower would embrace a similar allocation structure. Monetails obliged the party to allocate the allocation before the prevailing yield environment lapses.
Monetalis ruled out its involvement as the asset manager. Also, Pederson dismissed speculations that it assumed the role of the investment adviser. Sygnum Bank would formulate the asset strategy and influence the purchase.
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