Author: Xiao Bing
Geoffry Kendrick, Global Head of Digital Assets Research at Standard Chartered Bank, initiated coverage of Sky (formerly MakerDAO) on September 11, setting a target price for the SKY token to reach $0.325 by the end of 2028, roughly five times its current price of $0.065.
The core thesis of the report is: The value returned to SKY holders is expected to grow fivefold by the end of 2028, driven by the expansion of the Sky ecosystem and the growth in USDS circulation.
What's the basis for this five-fold valuation?
Understanding Sky as a Bank
Kendrick positions Sky as: "The Federal Bank of DeFi."
This analogy is highly effective for understanding Sky's business model.
In the traditional financial system, central banks issue currency, set benchmark interest rates, and provide funds to commercial banks at wholesale prices. Commercial banks then decide where to deploy these funds to earn interest rate spreads.
Sky's structure is almost a direct on-chain mapping of this model.
USDS and DAI are the "currency" issued by Sky. Their combined circulation exceeds $12 billion, with USDS growing 74% in 2025 to approximately $9.2 billion. sUSDS (staked USDS), at about $5.5 billion, has become the largest yield-bearing stablecoin on-chain.
Spark, Grove, and Obex are Sky's "commercial banks" (officially termed Agents). They borrow USDS from Sky, currently totaling about $5.9 billion, with a combined borrowing limit of approximately $17.5 billion. They pay Sky a base interest rate of about 3.8%.
Spark focuses on crypto lending. It is a fork of Aave V3, with a TVL of about $6.8 billion (data from April 2026), deploying funds through protocols like Aave and Morpho.
Grove focuses on real-world assets (RWA), managing a TVL of about $2.6 billion. This includes $1 billion invested in AAA-rated CLOs (Collateralized Loan Obligations), with partners including BlackRock, Janus Henderson, and Apollo. Obex is managed by Framework Ventures, holds about $2.5 billion in USDS, and brings professional capital allocators into the Sky ecosystem.
Sky also generates revenue from two additional sources: USDC reserves held via Coinbase (the Peg Stability Module, PSM, allows swapping between USDS and USDC), and legacy DAI crypto lending vaults.
Sky prints money, Agents earn the spread, and Sky takes a cut from that spread.
The Revenue Numbers
For the full year 2025, the Sky Protocol recorded approximately $338 million in total protocol revenue, up about 10% year-over-year, while operating expenses were reduced by 63%. Annualized protocol profit was about $168 million. Q1 2026 saw quarterly total revenue of approximately $123.8 million. Q2 2026 total revenue was about $107.4 million, up 10.5% year-over-year.
The Sky Frontier Foundation estimates full-year 2026 total revenue to be about $611.5 million, an 81% increase.
This revenue flows into two pockets.
One is sUSDS holders. In Q2 2026, approximately $53.91 million was distributed to sUSDS holders via the Sky Savings Rate, accounting for about 80% of protocol expenses for the quarter.
The other is SKY holders. Since its launch in February 2025, the Smart Burn Engine has used protocol surplus to buy and burn SKY on the open market, deploying about $102 million in its first year (averaging about $1 million daily). For full-year 2025, buybacks totaled approximately $96.8 million. The current yield for SKY stakers is about 4.2%.
Kendrick's five-fold valuation is precisely anchored to the value flowing to SKY holders.
Where the Five-Fold Comes From: A Two-Stage Growth Model
Kendrick's reasoning is divided into two stages.
Stage One: Reserve Buffer Reaches Target, Allocation Ratio Increases.
Sky currently holds a reserve buffer (aggregate backstop capital) of about $90 million. The protocol retains a portion of revenue to build this buffer. At the current pace, Kendrick estimates the buffer will reach $150 million in about eight months. If, simultaneously, a capital ratio threshold of 1.5% of USDS circulation is met, funds allocated for SKY staking rewards and buybacks could potentially double.
This is a relatively conservative judgment. It does not rely on new business growth, only on the passage of time and the natural accumulation of existing revenue.
Stage Two: Agent Borrowing Reaches Limit, Revenue Jumps.
The combined borrowing limit for Spark, Grove, and Obex is $17.5 billion. Current actual borrowing is $5.9 billion, a utilization rate of about 34%. If the three major Agents borrow up to their limits, assuming the spread remains constant, revenue could grow another two to three times.
Combining the two stages: Allocation ratio doubling × Revenue scaling 2-3x ≈ Value growth for SKY holders of about 4-6 times. Taking the midpoint gives roughly five times.
A key assumption of this model is that SKY's staking yield remains at approximately 4.2%. Kendrick characterizes SKY as a "staking yield token," whose price rises with growing earnings. Under a constant yield condition, higher rewards support a higher token price.
Three Assumptions That Need Challenging
Standard Chartered's model is logically sound, but each multiplier rests on assumptions.
Assumption One: Agent borrowing can reach the $17.5 billion limit.
Growing from the current $5.9 billion to $17.5 billion requires roughly a three-fold increase. This depends on Spark maintaining its share in the competitive crypto lending market, Grove continuously finding high-quality RWA opportunities, and Obex attracting sufficient external capital allocators. In the highly competitive DeFi lending landscape (Aave, Morpho, Compound) and a potentially changing interest rate environment, $17.5 billion is not a given.
Assumption Two: Stable Spread.
The 3.8% base rate is set by Sky governance and can be adjusted at any time. If competition in the stablecoin market intensifies (e.g., Ethena's USDe, USDC's native yield, Tether's direct reserve yield distribution), Sky may need to lower its rates to maintain USDS's attractiveness. Rate compression directly compresses revenue.
Assumption Three: Revenue Continues to Flow to SKY Holders.
In March 2026, Sky governance temporarily suspended the Smart Burn Engine's buyback operations to preserve surplus. This indicates that value return to SKY holders is driven by governance decisions, not by automated contract execution. When market conditions deteriorate, governance can (and has) choose to prioritize preserving protocol assets over rewarding holders. SKY represents a potential claim on residual income, not a fixed income promise.
Kendrick himself points out the core risk: "This view faces the greatest risk if the growth of yield-bearing stablecoins is slower than expected."
Key Metrics to Track
Whether SKY fulfills Standard Chartered's forecast will be determined by several numbers that can be verified in real-time on-chain:
USDS circulation growth rate (currently ~$9.2B, SC's model implies reaching ~$20B by end-2028);
Changes in the utilization rate of the three major Agents' actual borrowing against the $17.5B limit;
Whether the reserve buffer reaches $150M within eight months and constitutes 1.5% of USDS;
Whether the Smart Burn Engine's monthly buyback amount recovers to over $1M daily (post-March suspension) and whether the SKY staking yield remains above 4%.
These figures don't require waiting for a Standard Chartered report update; on-chain data and the Sky Frontier Foundation's quarterly reports provide a complete verification path.
Investment decisions should be based on the actual trajectory of these metrics, not on any investment bank's target price.
