Negative spread

If you are borrowing DAI from Compound - time to migrate to MakerCDP

There was a time when Maker stability fee was even below Compound supply rate.
This was arbitraged in March.

For me the most interesting “scientific governance“ question is what would happen with MKR governance fee being always between Compound supply and borrow rate:

Current supply rate: ( poor’s man DAI Savings rate ) 9.95%

Current borrow rate: 15.62%

Average: 12.79%

If it’s cheaper to open CDP vs borrow from Compound there is little interest rate nudge towards destroying “secondary DAI“ and creating primary DAI.

Sounds complicated?

M0 DAI = real DAI existing and verifiable on the blockchain: ( roughly $77.7M )

M1 DAI = M0 + DAI borrowed from DeFi

Total DAI outstanding = ~$108M

It means that $33M worth of DAI is created by Compound and similar projects.

It’s both lost of governance revenue for Maker and de-facto DAI savings rate substitute AND short-term and fast acting damper on DAI creation / destruction.
Compound adjusts it’s lending and borrowing rates instantly each per block.

If you don’t hate the money you can switch from Compound to Maker ( afaik InstaDapp charges some fee for doing that ) - you can do it yourself but it would require more clicking with Metamask.

Is MKR reduction of governance fee bullish or bearish for ETH?

Definitely bullish: now it’s cheaper to leverage and open long ETH positions on all DeFi platforms ( DeFi is driving demand for ETH even without any additional retail money invested )