DAI stablecoin holders need to be cautious now- Here’s why

ambcrypto.com:

The U.S. Treasury Department imposed sanctions on virtual currency mixer Tornado Cash. Subsequently, Circle, the issuer of the USD Coin (USDC), froze over 75,000 USDC linked to the sanctioned Tornado Cash addresses.

Indeed, a move that stirred up fears of stablecoin censorship in the crypto community. Well, undoubtedly, this might just start another debacle for yet another stablecoin.

DAI is the fourth largest stablecoin in the cryptocurrency market. And, the fifteenth largest asset by market capitalization. The Ethereum-based stablecoin DAI had major on-chain movement, particularly during ETH‘s rebound back to $2,000. 

The movements can be observed in Santiment’s graph below. Herein, DAI’s circulation hit an all-time high (ATH) of 888 million, whereas supply on exchanges slid to 5.2%. Thereby, marking the lowest figure since February.

Source: Santiment

The fall of DAI’s supply on exchanges underlines a decline in the interest of institutional and retail investors to enter the markets. This doesn’t come as a total surprise given DAI’s relation with the ‘already-troubled’ stablecoin- USDC.

More than 50% of MakerDAO’s DAI is collateralized by USDC, according to Dai Stats. As per the pie chart here, the percentage stood at 51.8%.

Source: Dai Stats

Needless to say, following the USDC fiasco, renowned crypto enthusiasts censured the dependence here.

For instance, MakerDAO founder Rune Christensen raised concerns over the asset’s heavy reliance on a centralized asset in USDC.

In fact, he even urged members of the decentralized autonomous organization (DAO) to “seriously consider” preparing for the depeg of DAI from USD.

This move could offset any risks relating to Circle’s recent freezing of sanctioned USD Coin (USDC) addresses. In this