The Bull Case for $MKR $SKY
$MKR is Dead, Long Live $MKR
In this post, I’ll be laying out the bull case for why $MKR will outperform the majority of crypto assets on a risk-adjusted basis in Q1/Q2 2025. I've also uploaded this video on my channel if you want more color.
TLDR MKR Bull Case:
$30M per month of buybacks started
DAI/USDS supply approaching ATHs despite "down bad" sentiment
SPK farming soon (money printer)
NOTE: MKR rebranded to SKY so they are technically the same token. DAI also rebranded to USDS.
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Buybacks are back
That’s right, buybacks are back. This time at an accelerated pace. Following a proposal which was executed on Monday February 24, an additional $55m USDS has been earmarked for buybacks. This will execute at a rate of $30M per month, or roughly $1M/day.
In reality it will likely be more because the protocol is profitable ($125m of annual net revenue or $10.42m per month) as shown below.
Given the current price of $MKR at $1600, $30M of buy pressure would mean the protocol would buy back ~1.9% of its total supply. To put things to perspective, @MicroStrategy has purchased 2% of BTC supply over the last 4.5 yrs. I believe this amount of buy pressure and its pace has not been priced in by the market.
We attribute majority of MKR underperformance in 2024 to the rebrand, which was not welcomed by the market. However, USDS has actually been growing having bottomed out at around 4.5 billion. "Sentiment down, fundamentals up" creates a nice opportunity for a growth narrative for a coin with very light positioning (some may say a hated rally).
On a final note here, Rune has expressed a desire to severely cut MakerDAO core expenses which currently run hot at ~$50m. This will be achieved by spinning off core projects into their own independent “Star agents” such as Spark (which we touch on more below). This can only be viewed as positive as it would further increase the duration of buybacks.
SPK Token Launch
Spark, a lending market with $3B TVL and an asset manager, was spun out of MakerDAO. This post implies that SPK farming and TGE will take place relatively soon which would add fuel to the buyback fire.
SPK will be a "fair launch/farm" token that you can only farm by staking USDS or SKY (read economics here). This means that there will likely be more demand for SKY/USDS to farm, which will in turn boost metrics such as stablecoin supply and revenue/profits. Equally, it is likely that some USDS will exit the SSR to farm SPK which would increase revenue even with no further USDS growth.
50% of SPK 0.00%↑ incentives will be distributed in the first two years. If we assume an FDV of $1B, that is $500M of value that will go to SKY/USDS stakers which will provide staking yield for the native token as well as subsidize USDS growth which fuels even more buybacks in the future.
There are other subDAOs/Stars launching on the horizon (Solana Star, RWA Star, etc), which will only fuel more buybacks in the future.
Stablecoin Bill
For those of you who haven’t been following regulatory movements in the US, The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act aims to create a federal framework for the issuance and regulation of payment stablecoins in the US.
It is unclear which players this will benefit (outside of Circle) but in the event that we see a narrative forming leading into more headlines about GENIUS, we think it is likely that MKR falls firmly in the liquid traders basket of stablecoin related projects which provide exposure to the narrative. While this is weaker than the other catalysts, it represents another reason why certain market participants might want to get long MKR; it is not hard to see that the demand side for this coin could be stacking up in favor of bulls.
Conclusion
The SKY rebrand has been a bit of a flop butit's likely already reflected in price (Downtrend from April 2024 until February 2025). Looking forward, for the reasons we have laid out in this post, there is every reason to believe the next few months will be positive for MKR. As a final point, although the sample size is small, we have often seen MKR perform well during uncertain or choppy market conditions which is the most likely market outlook for the foreseeable future.
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