MakerDAO Increases US Treasury Bond Holdings by 150%

MakerDAO, a lending protocol and stablecoin issuer, has voted in favor of a proposal to expand the amount of United States Government bonds held in its portfolio by 150%, from $500 million to $1.25 billion. This would be a significant increase. This action is being taken with the goals of diversifying its liquid assets and earning a net yearly yield in the range of 4.6% to 4.5%. The remaining $500 million of USDC in the PSM will be handled by decentralized finance asset manager Monetalis Clydesdale. MakerDAO has plans to deploy $750 million of the USDC in the PSM to acquire further US Treasury bonds.

The bonds will be acquired with equal maturities, monthly, and over the course of a period of six months; the total number of slots will be 12, and each slot will be worth $62.5 million. After taking into account the costs of custody, the proposition is anticipated to result in a net yearly return of 4.6% to 4.5%. The income stream of MakerDAO can potentially benefit from an increase in trading expenses. This action will result in the continuation of Monetalis Clydesdale’s management of a current allocation of $500 million from the United States Treasury, which has been in effect since October 2022.

On the other hand, some people who took part in the governance forum had reservations about the proposition. They pointed out that MakerDAO has not yet received any money from Monetalis for the first half billion DAI, and they claimed that questions asked in Maker’s Discord and governance forum were not responded swiftly, which did not provide sufficient time to evaluate the proposal.

The failure of Silicon Valley Bank on March 11 caused widespread fear throughout markets and led to the depeg of a number of stablecoins, including USD Coin (USDC) and Dai. In response to this, MakerDAO said that its community was working on suggestions to convert its stablecoin exposure to money market instruments, such as U.S. Treasurys, “with the objective of diversifying DAI’s liquid collateral.”


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Crypto Becomes Valid Portfolio Options and Assets Diversifier , Says Wells Fargo’s Subsidiary

Wells Fargo Investment Institutea registered investment adviser and wholly owned subsidiary of Wells Fargo, recently released its fifth publication in its digital asset and cryptocurrency educational series in August, as seen on Sunday, August 7.

The investment advisory firm published the report to ensure that new investors see the comprehensive picture of the digital assets industry and therefore take advantage of investing in the new asset class.

As per the new report, Wells Fargo considers digital assets as a transformative innovation, just like the internet, cars, and electricity.

The investment adviser described cryptocurrencies as the building blocks of a new large digital network that moves money and assets. That network is open for anyone in the world to use. Wells Fargo said infrastructure is emerging to support this new Internet of Value.

Since traditional finance is starting to embrace open networks, adopting digital assets is expected to accelerate over the coming years.

According to Wells Fargo, early adopters are set to gain profitability (economies of scale), while those late comers could lose something that the internet has taught the world for 40 years.

The adviser stated that while there is an investment thesis behind digital assets, the industry is still young to become mature, and therefore, many investment risks remain.

The main risks facing the industry are additional regulation, technology and business failures, limited consumer protections, price volatility, as well as operational risks associated with handling and storing digital assets, the bank elaborated.

Wells Fargo said cryptocurrencies have evolved into a viable investment asset. Long-term supply and demand trends further support industry growth and compress price volatility. Crypto has therefore emerged to play a role as portfolio diversifier. The bank classifies cryptocurrency or digital asset investment as an alternative investment.

Crypto Increasingly Gaining Mainstream Adoption

In 2020, several crucial events attracted increased mainstream usage in transactions and accelerated the maturation of crypto markets. For example, banks received regulatory permission to custody cryptocurrencies. Regulators took additional steps to extend a legal and oversight framework that have helped solidify crypto as investable assets.

In 2020 and 2021, more operating companies such as MicroStrategy, the Block Inc., (formerly Square), Tesla, among others, began allocating cash to digital assets and cryptocurrencies.

This year, crypto continues to gain ground as an investment despite the market crash. According to a recent Morning Consult data intelligence and market research firm survey, about 24% of American consumers own crypto.

Research shows that clients are increasingly asking investment advisors about crypto – with 94% of financial advisors receiving questions about the asset class from clients in 2021.

Cryptocurrency should be part of clients’ portfolios as long as they can afford to lose that money and they are going to keep it for a seriously long period of time, according to Suze Orman, a US personal finance expert.

Many experts advise clients that cryptocurrencies should be about 5% of their portfolio and not more.

Image source: Shutterstock


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Tether Says No Chinese Commercial Papers Holding on its Reserve

Tether Holdings Ltd, the blockchain startup that is in charge of the USDT stablecoin issuance and operations, has come out yet again to address the growing rumours about the composition of its reserve base. 


Per the update on Wednesday, the stablecoin issuer said it is unlike what is currently in circulation. It holds no Chinese Commercial Paper as a part of the security to protect the integrity of the USDT. The firm warned against the impacts of false news, which can literally do more damage to the ecosystem than even cyber threats.

“The spreading of false information is the biggest threat to the cryptocurrency industry that currently exists. It is a threat of the same concern as scams, hacks, or cyberattacks because the spreading of false information risks not only the reputation of the industry but also each and every member of the community,” the company wrote in the update.

It clearly outlined that its total Commercial Paper exposure has been slashed from 30 billion as of July 2021 to approximately 3.7 billion nowadays. The firm said it plans to reduce the commercial papers to about 200 million by the end of August this year and its ultimate goal is to take the number to 0 latest by the end of November this year.

Maintaining a robust reserve has always been a major requirement for running a stablecoin like the USDT. While it has been bedevilled by a number of controversies with regulators in the past, Tether is now committed to publishing a regularly updated report about its stablecoin reserve portfolio.

Circle, the issuer of the second largest stablecoin, USDC, has also joined this trend as both stablecoin companies have continued to face scrutiny following the collapse of TerraUSD (UST) algorithmic stablecoin. Regulators are determined to prevent any other such mishap, and the oversight on these platforms has grown over the past couple of weeks.

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Crypto exposure has positive impact on investment portfolios, study shows

Allocating funds to crypto investment positions has been shown to have a positive impact on the performance of diversified investment portfolios.

According to a research study by crypto asset management outfits Iconic Funds and Cryptology Asset Group, the ability of crypto investments to positively impact the performance of investment portfolios cuts across several asset allocation models.

This ability to improve the profitability of diversified investment portfolios is even despite the volatility of cryptocurrencies, especially the recent market crash that occurred in May.

The research study titled: “Cryptocurrencies and the Sharpe Ratio of Traditional Investment Models” examined changes in the risk-return profile of several portfolio allocation methods due to the addition of cryptocurrency assets.

This risk-return examination was conducted via measuring changes in the Sharpe ratio — the measure of excess returns earned for holding a volatile asset — when crypto positions were included in the different asset portfolio models.

With crypto supposedly an uncorrelated asset class, the risk-reward performance of investment portfolios should improve with the addition of cryptocurrencies despite their apparent volatile price movements.

By assuming a passive investment strategy, the study mapped the changes in the Sharpe ratio for traditional portfolio models with the introduction of crypto exposure against a reference index with no cryptocurrency allocation.

Source: Cryptocurrencies and the Sharpe Ratio of Traditional Investment Models

To investigate the impact of increasing the crypto positions for each portfolio model, the study also rebalanced the cryptocurrency allocation on a 1%, 3% and 5% basis.

Detailing its findings, the study stated: “This report finds that the addition of cryptocurrencies to any portfolio covered had a positive impact on the returns as well as the risk-reward performance of the portfolio,” adding:

“This finding holds despite a significant correction in the crypto markets during the beginning of 2021. Furthermore, the addition of more cryptocurrencies led to even higher returns.”

According to the document, the results of the 2021 study also lend credence to the conclusions drawn in the 2020 research that showed the positive impact of crypto allocations to investment portfolios despite the market crash of mid-March (Black Thursday).

Related: Mr. Wonderful’s crypto allocation is now larger than his gold holdings

Crypto exposure is becoming a significant trend among institutional investors. As previously reported by Cointelegraph, a recent Bank of America report showed 20 major public companies in the United States having significant digital asset-based investments.

Back in September, a survey by European investment management outfit Nickel Digital Asset Management stated that 62% of global institutional investors with zero crypto exposure will begin making forays into cryptocurrency and blockchain within the next 12 months.