Crypto loans exceed RWA as the main revenue driver for MakerDAO

Crypto sentiment seems to have reversed after last year's gains, and one MakerDAO data point may suggest that optimistic bets are back.

The data point in question is MakerDAO's revenue matrix, and crypto-backed loans are now the DeFi protocol's largest revenue contributor, surpassing Maker's real-world asset (RWA) vault.

There and back again: DeFi-generation loans

DeFi native loans now account for 50.1% of MakerDAO's $243 million annual revenue.

Crypto-backed lending has now reached $2.4 billion for the DeFi powerhouse, the data shows, and is projected to generate $122 million in revenue, surpassing the protocol's RWA Vault, which has an estimated annual revenue of up to $107 million.

Crypto lending, being the main revenue driver for the maker, is a return to normality for the project. Prior to the RWA push last year, DeFi native lending had projected annual revenue of up to $200 million in DeFi by 2021, the latest peak.

Since then, Defy Credit has experienced a major downturn as the Crypto market has experienced a massive bear winter that saw a massive run on two major crashes – the Terra Luna crash and the FTX explosion.

Defi protocols like Maker and Aave, which played it safe, seem to have weathered the wave of small players withering away, with some shutting down their services.

Now, it appears to be in the midst of a market renaissance that saw crypto loans double to $1.7 trillion last year. This development could mean a return to appetite for risky long bets on future crypto prices as demand for crypto-backed loans increases.

But why do crypto loans ring bells for bullish sentiments? Well, Maker lends the DAI stablecoin, and the asset class is the main liquidity driver for the business. Crypto loans, which account for more than half of maker revenue, indicate that sentiment has waned and traders need more loans to get the high yields that characterize a bull market.

Making money from RWA and crypto loans

A shift in risk assets may indicate that market participants expect a rate cut by the US Federal Reserve and see little reason to park their money in US Treasuries when DeFi rates are headed for double-digit yields.

However, MakerDAO's earning capacity will continue to grow and it is independent of whether DeFi rates are higher or lower than US fed interest rates.

As previously reported by CryptoPotato, Maker has injected $100 million worth of RWA through BlockTower Andromeda, the majority of which is allocated to short-term US Treasury bonds.

The addition is part of the protocol's “endgame” plan, introduced by founder Rune Christensen, to further increase investments in RWA as well as decentralize support for the DAI stablecoin.