Maker (MKR) Analysis: Slides 10% Versus ETH, Will $500 Hold?

The Maker (MKR) price is under-performing other DeFi tokens.

Despite the increasing popularity of trustless lending, MKR is trading in a narrow $100 range with caps at $600 and noticeable support at $500.

The MKR price is stable in the last hour. However, it trails the USD, BTC, and ETH, shedding 4, 15, and 10 percent, respectively in the last trading week.

Maker (MKR) Overview

From a top-down analysis, the token’s price is in range mode. Support lies at $500 and Q3 2020 lows of around $430.

Even though traders are optimistic about MKR’s prospects, how the asset derives value is noteworthy. It has a direct effect on MKR’s valuation.

Bulls can watch price reaction at $570—in the immediate term, and $600 in the medium term only if there is a favorable repricing from spot levels.

On the flip side, if DeFi is peaking and the prices of supported collaterals—especially ETH—and select tokens, contract, odds of MKR slumping below $500 is highly likely.

Maker (MKR) Market Movers

The Maker (MKR) is the governance token of the trustless lending protocol and the DAI credit system. It serves three main functions:

• A utility since CDP fees is payable in MKR, not ETH.
• A Governance token where holders can vote on proposals.
• A lender of the last resort whenever there are sharp price movements.

Therefore, how the token performs is directly dependent on how active the protocol is. The more there are lenders, the more MKR tokens are burnt through fees reducing supply and boosting prices.

On the flip side, if there is market turbulence and ETH prices shrink—or there are smart contracts hitches due to the Ethereum platform’s congestion, for example, more MKR tokens must be generated for recapitalization.

Presently, the protocol is active. An observation by GlassNode — an analytics platform, notes that in total, MKR transactions have surpassed the one million mark.

📈 Cumulative $MKR Number of Transfers just went above 1,000,000.

Current value: 1,000,131

View metric:https://t.co/Fidqg7fVQz pic.twitter.com/VX2rNtSitE

— glassnode alerts (@glassnodealerts) November 19, 2020

There was an uptick in transfers in the last hour.

📈 $MKR Number of Transfers (1d MA) increased significantly in the last 24 hours.

Current value is 111.125 (up 54.9% from 71.750)

View metric:https://t.co/Fidqg7fVQz pic.twitter.com/E5C10wLLdt

— glassnode alerts (@glassnodealerts) November 20, 2020

There are also plans to increase the number of CDP collaterals as per a Nov 18 update.

Additionally, a proposal to protect the protocol against Flash Loan attacks has been approved and set for activation in the coming days.

Maker (MKR) Price Analysis

The MKR price is in range mode, as aforementioned.

With bulls capped at $570, the accompanying breakthrough should be with high trading volumes that may ultimately drive prices above $600 as price action snap back to trend.

Ideally, a close above $600 may be the foundation for a rally towards September 2020 highs of $740. Sustained buy pressure will open up MKR for Aug 2020 highs of $850.

The Fibonacci retracement tool on the July to Aug 2020 trade range shows that MKR has support at the 78.6 percent level. The 61.8 percent level corresponds to the $600 resistance level, adding weight to the significance of the liquidation point.

If $500 fails and the MKR price falls, a complete retracement back to July 2020 lows of $430 is on the card.

Chart courtesy of Trading View

Disclaimer: Views and opinions expressed are those of the author and are not investment advice. Do your research.