MakerDAO rushes to withdraw $250 million from Coinbase to protect DAI peg amid massive liquidation

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MakerDAO’s bailout helped DAI avoid decoupling.

On October 31, DAI’s USDC reserves suddenly fell below $60 million. This has raised concerns about the decoupling of the DAI stablecoin, as DAI requires over $200 million in collateral to be considered safe.

Realizing that the situation was not promising, MakerDAO quickly moved $250 million from Coinbase custody into DAI’s Pegged Stability Module (PSM). Currently, MakerDAO only has $250 million left in its Coinbase custody account.

*PSM is a collateral pool that allows users to mint USDC for DAI at a 1:1 ratio and arbitrage DAI back to the U.S. dollar. If PSM’s reserves are depleted, the DAI price could rise or fall below $1.

Coinbase to PSM transfer. Source: Etherscan

Fortunately, MakerDAO’s bailout helped DAI avoid decoupling.

What is decoupling? Why is decoupling a “ghost” plaguing the cryptocurrency market?

The immediate danger was partially averted, but Allan Pedersen, CEO of DeFi lending company Monetalis, subsequently made multiple comments on the forum, asking trust management company SHRM to provide funds for PSM. However, SHRM Trust Management Company has not yet responded.

It is understood that between October 29 and 31, before the arrival of Coinbase custody relief, more than $100 million left PSM. Notably, the money appears to be flowing to centralized exchanges.

At the Maker Forum, Allan Pederson announced that the project team is working on automating PSM using smart contracts, “but for now, the automation is based on a principal manual, with administrators, legal structures and central banks/exchanges remaining safe and stable.”

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