The Background
Dai is called multi-collateral because it is backed by a mix of cryptocurrencies. An earlier version of this coin was Single-Collateral Dai (SAI), which was only backed by one asset. When new DAI enters into circulation, users deposit their collateral into smart contract vaults.
Santiment has highlighted an interesting pattern between spikes in the Multi-Collateral Dai repaid indicator and changes to Ethereum’s price trend over time. Whenever large amounts of DAI were destroyed to release WETH, either a top or bottom formation occurred for cryptocurrency prices. In 2020 there were two instances where this happened: first when ETH crashed due to 3AC bankruptcy and secondly earlier this year when ETH formed a local top.
Current Trends
In February 2021 another spike coincided with forming yet another local top for ETH; recently, however, we’ve seen another significant increase indicating someone withdrawing wrapped form Ethereum previously used to back up DAI tokens – totaling around 43.4 million DAI destroyed during this latest surge alone! If previous patterns hold true then current repayments could lead us towards observing either more tops or bottoms soon enough!
One of the metrics seems to have observed a large value in recent days | Source: Santiment on Twitter
Yesterday, Ethereum plunged below $1,800 but has since rebounded above this level. It’s unclear whether the metric’s influence is already done with or if there will be more effects yet to come.
Ethereum Price
At present, Ethereum trades around $1,800 and has seen a 1% decrease over the past week.
ETH has already recovered today | Source: ETHUSD on TradingView
In Conclusion
The Multi-Collateral Dai repaid indicator may provide insight into future price trends for cryptocurrencies like Ethereum. As always though, it’s important to remember that market conditions are constantly changing and nothing can predict these changes with certainty!
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