Smart Trader Nets $292.4K Profit in Strategic MKR Short Position – Here’s How

A decentralized finance (DeFi) trader has successfully closed a short position on MakerDAO’s governance token, MKR, earning a notable profit of around $292,400.

MKR, a key component of the Maker protocol, supports the creation of DAI, a decentralized stablecoin. MKR token holders influence governance decisions impacting the protocol’s direction.

The Strategic Move

On July 19, the trader initiated a short position by borrowing 500 MKR tokens from Aave, a decentralized lending platform. The trader converted the borrowed MKR into 1.37 million USDC, a stablecoin pegged to the U.S. dollar.

A smart trader closed his $MKR short position and made ~$292.4K!

On July 19, this trader borrowed 500 $MKR from #Aave and sold it for 1.37M $USDC.

16 hours ago, he only spent 1.07M $USDC to buy back the $MKR needed to repay his debt at a lower price.

Address:… pic.twitter.com/jQzTBsLt6L

— Lookonchain (@lookonchain) August 14, 2024

The decision to short MKR was likely influenced by market indicators forecasting a drop in the token’s value, possibly due to general market trends or specific issues within the MakerDAO system.

According to Lookonchain, a blockchain analytics platform, the trader benefited from a decline in MKR’s price, repurchasing the 500 MKR tokens at a reduced cost of $1.07 million. The decrease in MKR’s value likely resulted from lower demand and market volatility. By waiting for the right moment, the trader managed to repay the borrowed tokens and keep the difference between the sale and repurchase prices.

Investors Show Growing DeFi Interest

In another market development, a whale who was liquidated for 2,890 wstETH (valued at $8.06 million) during the market crash on August 5 has taken a bullish stance on ETH. Since August 11, this whale has borrowed 6.6 million DAI, 2.7 million USDT, and 2.5 million USDC to acquire 4,459 ETH, totaling about $11.8 million, at a price of $2,646 per ETH.

By using stablecoins like DAI, USDT, and USDC to buy ETH, the whale aims to leverage their capital for potential future gains as ETH’s price rises. This move shows confidence in Ethereum’s long-term growth despite recent market turbulence and significant liquidations.

Both the whale’s strategic re-entry into ETH and the trader’s successful MKR short position underscore the growing interest and sophistication in DeFi activities. These moves reflect an increasing confidence in the DeFi sector’s potential, as investors use advanced strategies to capitalize on market opportunities.