Why did the price of SKY fall?

Sky (SKY) dropped 1.32% in the last 24 hours, underperforming the overall crypto market, which was mostly flat with a 0.58% gain. The main reasons for this include:

1. Technical resistance – SKY’s price is stuck below important moving averages, limiting upward momentum.
2. Stablecoin competition – Sky’s stablecoin, USDS, offers lower yields compared to rivals like USDe, which pays 10.86% versus USDS’s 4.75%.
3. Buyback fatigue – Although the protocol is buying back $250,000 worth of SKY daily, it’s not enough to offset the selling pressure.

Deep Dive

1. Technical Resistance (Negative Impact)

Overview: SKY is currently trading at $0.068, which is below its 7-day simple moving average (SMA) of $0.0684 and its 30-day SMA of $0.0704. The Relative Strength Index (RSI) is at 45.65, indicating neutral momentum. Fibonacci retracement levels show resistance around $0.0768 (the 23.6% retracement level).

What this means: The fact that SKY can’t stay above $0.07 suggests weak buying interest. Traders might be selling near the 30-day average to take profits, which adds selling pressure.

Watch: If SKY can break and hold above $0.072 (the 50% Fibonacci level), it could signal a shift toward more positive market sentiment.

2. Stablecoin Yield Competition (Mixed Impact)

Overview: Sky’s stablecoin, USDS, offers a 4.75% annual yield through its Savings Rate. However, competing stablecoins like Ethena’s USDe offer much higher yields, around 10.86% (Gate.com).

What this means: Even though the supply of USDS has grown 29% year-over-year to $8 billion, some investors focused on yield might move their funds to higher-paying stablecoins. This competition can put downward pressure on SKY’s value as its stablecoin ecosystem competes for investment.

3. Buyback Program Challenges (Negative Impact)

Overview: Sky Protocol repurchased 16.9 million SKY tokens (worth about $1.15 million) last week, as part of an $80 million buyback plan. However, the daily buybacks of $250,000 only represent about 1.17% of SKY’s 24-hour trading volume.

What this means: The buyback efforts are being overshadowed by selling activity, likely from holders exiting their positions amid stagnant prices. Since the buyback program started, over 1.12 billion SKY tokens (about 4.8% of total supply) have been repurchased, but new supply from MKR conversions continues to dilute the market.

Conclusion

The recent drop in SKY’s price is driven by technical challenges, stiff competition in the stablecoin yield space, and buybacks that aren’t strong enough to counter selling pressure. While the protocol’s $2.5 billion expansion on the Solana network (CoinDesk) shows promise for the long term, short-term market sentiment remains cautious.

Key point to watch: Can SKY maintain support at $0.067 (the 78.6% Fibonacci retracement level) as Bitcoin dominance reaches 58.29%?

What could affect the price of SKY?

Sky’s price is currently influenced by two main forces: upcoming protocol upgrades and competition from other stablecoins.

1. Token Migration Penalty (Positive) – Starting September 18, a penalty on old tokens may encourage holders to switch from MKR to SKY, reducing leftover tokens that could weigh on the price.
2. Solana Expansion (Mixed) – Keel’s $2.5 billion plan to grow on the Solana network might increase demand for USDS but could also split investment across different platforms.
3. Regulatory Risks (Negative) – A B- rating from S&P highlights concerns about centralized control and compliance issues.

Deep Dive

1. Token Migration & Buybacks (Positive Impact)

Overview:
Sky is introducing a penalty starting September 18, 2025, charging a 1% fee on MKR tokens that haven’t been converted to SKY. This fee will increase every quarter to encourage holders to switch. As of October 2025, about 19% of MKR tokens (worth roughly $316 million) remain unconverted. At the same time, the protocol is buying back SKY tokens—1.09 billion so far (about 3.2% of total supply)—using $1.39 million USDS weekly, which helps reduce the number of tokens available and supports the price.

What this means:
Faster conversions from MKR to SKY could reduce selling pressure on the old tokens, while buybacks help maintain SKY’s price. However, if conversions take too long, it might hurt confidence in the project’s governance.

2. Solana Integration via Keel (Mixed Impact)

Overview:
Keel, a project focused on the Solana blockchain, plans to invest $2.5 billion of USDS reserves into Solana’s decentralized finance (DeFi) platforms like Kamino and Jupiter to increase yields and liquidity. This follows Sky’s $25 million proposal to expand the use of its stablecoin USDH across different blockchains.

What this means:
If successful, this could increase USDS adoption, boost protocol revenue (currently offering a 4.75% Sky Savings Rate), and make SKY more useful. However, Solana’s ecosystem can be unpredictable, and competition from other stablecoins like USDC could limit growth.

3. Regulatory & Competitive Pressures (Negative Impact)

Overview:
In August 2025, S&P gave Sky a B- rating, pointing out issues with centralized governance and concerns about USDS’s ability to maintain a stable peg. Meanwhile, USDS faces stiff competition from other stablecoins like Ethena’s USDe, which offers a higher yield (10.86% APY), and is losing ground to bigger players like Tether and USDC.

What this means:
Increased regulatory scrutiny or falling behind in the yield competition could reduce USDS’s $8 billion market value, which would lower the fees that fund SKY buybacks and staking rewards.

Conclusion

SKY’s short-term success depends on how quickly MKR holders convert their tokens and how well Keel performs on Solana. Long-term, the project needs to secure USDS’s place in a crowded stablecoin market. The key question remains: will the September 18 penalty push MKR holders to convert, or will they hold out?

What are people saying about SKY?

The Sky community is divided between excitement about the ecosystem’s growth and concerns about upcoming migration deadlines. Here’s what’s trending:

1. Urgent token migration – $323 million in MKR tokens still need to be converted before penalties kick in
2. Strong buyback activity – Over 1 billion SKY tokens have been repurchased so far
3. Institutional rating debate – S&P’s “B-” credit rating raises questions about risks in the protocol

In-Depth Look

1. Migration Deadline Creates Pressure

“More than $323 million in old MKR tokens remain unconverted ahead of the September 22 penalty start”
– @DLNews (854K followers · 2.1M impressions · Sept 19, 2025)
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What this means: There could be increased selling pressure as holders try to avoid a 1% quarterly penalty on unconverted MKR tokens. Keep an eye on trading opportunities between SKY and MKR, especially since exchanges like Binance are removing MKR trading pairs.

2. Buybacks Support Price Stability

“$1.39 million USDS spent last week to buy back 17.32 million SKY tokens – total buybacks now over 3.2% of supply”
– @SkyEcosystem (382K followers · 678K impressions · Aug 18, 2025)
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What this means: This is a positive sign for price stability. Daily buybacks of about $250,000 help counteract selling pressure and reduce the number of SKY tokens available on the market. These buybacks are funded by the protocol’s revenue, which is around $230 million annually.

3. S&P Credit Rating Sparks Discussion

“B- rating points to governance centralization risks despite a $1.2 billion treasury reserve”
– S&P Global (4.2M followers · Aug 8, 2025)
View original post
What this means: The rating has a neutral effect on institutional interest. It highlights some risks, like 9% of tokens held by founders, but also gives SKY credibility as a regulated decentralized finance (DeFi) asset. The protocol’s plan to diversify its treasury into real-world assets (RWAs) could improve future ratings.

Conclusion

The outlook for SKY is mixed. On one hand, aggressive tokenomics like buybacks and staking support the ecosystem. On the other, migration deadlines and regulatory concerns create uncertainty. So far, 56% of MKR tokens have been converted to SKY, but the remaining $323 million could cause volatility as the September 22 penalty approaches. Watch whether daily buybacks stay above $200,000 USDS. For supporters, integrations with Coinbase and Binance, plus a 4.75% Sky Savings Rate, provide strong fundamentals. However, S&P’s cautious rating reminds us that this rebranded MakerDAO project still faces challenges ahead.

What is the latest news about SKY?

Sky is gaining attention from big investors and growing its ecosystem, while encouraging MKR holders to switch over to SKY tokens. Here’s the latest update:

1. Top Pick for ‘Uptober’ (October 4, 2025) – BTG Pactual, a major Brazilian investment bank, highlights SKY for its attractive yield and token buybacks.
2. Keel’s $2.5 Billion Solana Initiative (September 30, 2025) – Sky launches Keel, a new DeFi unit focused on real-world assets and lending on the Solana blockchain.
3. MKR-to-SKY Penalty Vote (September 19, 2025) – Sky’s governance imposes fees on delayed MKR-to-SKY token conversions to speed up the rebranding process.

In-Depth Look

1. Top Pick for ‘Uptober’ (October 4, 2025)

What happened: BTG Pactual, Brazil’s largest investment bank, named SKY as one of its top crypto picks for October through its platform Mynt. They pointed to SKY’s 4.75% savings yield, $77 million in token buybacks, and the $8 billion circulation of USDS stablecoins. The report emphasized SKY’s ability to generate revenue through decentralized finance (DeFi), especially as U.S. interest rates ease and exchange-traded funds (ETFs) are anticipated.

Why it matters: This endorsement from a respected institution could attract more retail and corporate investors to SKY. However, SKY’s price has dropped about 7.9% over the past month. The focus on steady yields and buybacks fits well with cautious investment strategies during a neutral crypto market (Fear & Greed Index at 59). (CoinDesk)

2. Keel’s $2.5 Billion Solana Initiative (September 30, 2025)

What happened: Sky introduced Keel, a new capital management unit dedicated to the Solana blockchain. Keel is using USDS stablecoin reserves to invest in Solana-based DeFi projects like Kamino and Raydium. The goal is to increase liquidity and bring more real-world assets (RWAs) to Solana’s DeFi ecosystem, supported by Sky’s $7 billion stablecoin supply.

Why it matters: Keel expands Sky’s reach across different blockchains and adds new revenue opportunities. However, it also carries risks since Solana’s DeFi market ($30 billion total value locked) competes with Ethereum’s larger ecosystem. The success of this strategy depends on maintaining strong yields in a volatile lending market. (CoinDesk)

3. MKR-to-SKY Penalty Vote (September 19, 2025)

What happened: Sky’s governance community voted to start charging a 1% fee (which will increase quarterly) on MKR-to-SKY token conversions beginning September 22. This is designed to encourage holders to complete the switch and phase out MKR tokens. So far, over 81% of MKR has been converted, but $323 million worth remains.

Why it matters: The penalty aims to speed up SKY’s takeover but risks upsetting some long-time MKR holders. SKY’s price has fallen 15.6% over the past two months, reflecting some market doubts despite the protocol generating over $100 million in annual revenue. (The Block)

Conclusion

Sky is building credibility with big investors (like BTG Pactual), expanding its ecosystem through Keel on Solana, and tightening governance by penalizing delayed token conversions. While these moves strengthen its position in DeFi, SKY’s price has been relatively flat, down nearly 8% monthly. The big question is whether Sky’s focus on steady yields and its Solana strategy can overcome market challenges and conversion delays to drive future growth.

What is expected in the development of SKY?

Sky’s roadmap is focused on growing its ecosystem, improving governance, and building better infrastructure. Here are the key upcoming milestones:

1. Delayed Upgrade Penalty Increase (December 2025) – A 1% penalty will be added for MKR holders who haven’t upgraded, increasing every three months.
2. Powerhouse Spin-Off (Q4 2025) – Powerhouse will become an independent part of the ecosystem.
3. Atlas Rulebook Editor (Q4 2025) – A new tool to simplify governance documentation.
4. Core Simplification Proposal (Ongoing) – Efforts to make governance simpler and faster.

Deep Dive

1. Delayed Upgrade Penalty Increase (December 2025)

Overview
Starting September 18, 2025, MKR holders converting to SKY will face a 1% penalty, which will increase by 1% every three months. This encourages MKR holders to upgrade to SKY sooner rather than later (Upgrade Timeline).

What this means

• Positive: Encourages everyone to switch to SKY, which strengthens governance and reduces selling pressure from late upgrades.
• Potential risk: Could cause short-term price swings if big holders wait until penalties get very high.

2. Powerhouse Spin-Off (Q4 2025)

Overview
The Powerhouse team plans to become an independent entity focused on decentralized tools. They are 39% done, working on legal setup and token economics (Roadmap).

What this means

• Positive: Adds diversity to Sky’s governance and may bring in outside projects.
• Potential risk: Depends on regulatory approval and community agreement on token rules.

3. Atlas Rulebook Editor (Q4 2025)

Overview
This tool will clearly define Sky’s governance rules, like risk limits and treasury management. It’s halfway done and will connect with Notion for live updates.

What this means

• Positive: Makes governance more transparent and easier for new contributors to get involved.
• Potential risk: Technical challenges in updating older systems to work with the new tool.

4. Core Simplification Proposal (Ongoing)

Overview
A community-led effort to cut down on complex governance steps, helping sub-ecosystems like Spark and Grove grow faster.

What this means

• Positive: Faster decisions could speed up partnerships, such as integrating Hyperliquid’s USDH stablecoin.
• Potential risk: Simplifying too much might weaken important checks and balances.

Conclusion

Sky’s roadmap balances penalties for legacy MKR holders with plans to grow and improve the ecosystem. The December penalty increase and Powerhouse spin-off are key events to watch, while the Atlas Rulebook and Core Simplification aim to make governance stronger and more efficient.

Watch: Will the penalty system successfully move holders to SKY? Can Powerhouse attract new projects after becoming independent?

What updates are there in the SKY code base?

Sky’s software is improving with updates to governance and expanding its ecosystem.

1. Governance Transition Completed (September 2025) – Penalties for switching from MKR to SKY tokens are now active, making SKY the only token used for governance.
2. Smart Burn Engine Update (June 2025) – The system reduced its extra reserve to use capital more efficiently.
3. Staking & Rewards Launch (July 2025) – SKY holders can now stake their tokens and earn USDS rewards across the platform.

Deep Dive

1. Governance Transition Completed (September 2025)

Overview: Sky finished moving from MKR tokens to SKY tokens as the only way to participate in governance. Starting September 22, 2025, MKR holders who delay upgrading face a 1% penalty that increases every quarter. The system no longer allows converting SKY back to MKR, only the other way around. Governance rules were updated to stop MKR voting and focus on SKY-based proposals.

What this means: This is positive for SKY because it simplifies decision-making, removes outdated tokens from the system, and encourages people to hold SKY long-term. (Source)

2. Smart Burn Engine Update (June 2025)

Overview: A vote reduced the system’s extra reserve (called the surplus buffer) from 70 million USDS to 50 million USDS. This freed up 20 million USDS to be used for buying back tokens and rewarding users. The change adjusted how the system manages its reserves to balance stability with better use of funds.

What this means: This is neutral for SKY because it helps use the treasury more efficiently but depends more on steady revenue. (Source)

3. Staking & Rewards Launch (July 2025)

Overview: Updates now allow SKY holders to stake their tokens and earn rewards in USDS that vary based on the protocol’s revenue, replacing fixed rewards. The staking system supports direct delegation and works with Sky’s governance portal, so users can earn rewards without losing their voting power.

What this means: This is positive for SKY because it connects rewards to the platform’s success and encourages more people to participate. (Source)

Conclusion

Sky’s updates focus on finalizing governance, using capital more efficiently, and aligning incentives for token holders. With penalties for old tokens and rewards for active users, the question remains: will SKY’s development momentum lead to lasting growth?