The prospect of MKR issuance to recapitalize the system leads to decline in MKR price. Recapitalization is also likely to be needed when overall market sentiment is low. Basically the system is set up to buy high and sell low.
Over time this could lead to excessive dilution of MKR holders and make MKR a less valuable asset, which diminishes its value as a system backstop. I’m wondering how the mint/burn mechanics could be set up counter cyclically to avoid minting MKR at low prices?
My first impression is to greatly increase the surplus threshold before excess DAI is auctioned for MKR, to allow the system to cover losses from reserves instead of new issuance.
Is this a concern of anyone else? Any other prospective solutions or ideas to mitigate this?