Current situation: L.R at 101%, stability fees 6% & DAI at 1% slippage.
If a user decides to withdraw all the collateral to 101% (liquidation point). Most favourable condition for users who opened their vault when DAI had more than 1.5% slippage. Users can realise a minimum of 0.5% benefit without having anything at risk.
If DAI stays at 1% for more than a month. There will be no liquidators for vaults and in a little less than 2 months total vault debt will cross total vault collateral putting the Maker protocol at risk.
Immediate action:- Reduce stability fees to 1% or 2% if not 0. (As we’re seeing at 6% no one is minting DAI at 1% slippage)
I believe ETH will be the main reason for DAI stability but till the time ETH price surges USDC & stable coins should provide cushion to keep the DAI stable.
Edit: Stability fee is 4%.