Michaël van de Poppe - 20 October 2022
FRAX and its native token: Frax Share (FXS)!
Welcome to today’s blog article! Our FA and TA specialists did a fundamental and technical analysis on $FRAX!
FRAX-FXS
Frax is an open-source, permissionless, and entirely on-chain fractional stablecoin that is implemented on Ethereum and 12 other chains. Frax aims to be a unique stablecoin protocol that implements the design principles of both collateralized and algorithmic stablecoins. FRAX is the stablecoin of the ecosystem which is pegged to the US Dollar with 1:1 ratio.
The Frax Share token (FXS) is the non-stable utility token in the protocol. It is meant to be volatile and hold rights to governance and all utility of the system. The FXS is an ERC-20 token built on the Ethereum network, and its primary uses include governance, minting, staking, and redeeming FRAX, as well as providing liquidity incentives.
Frax announced that they will launch liquid staking for Ethereum with frxETH release. It is expected to go live in two weeks. FrxETH will be a liquid ETH staking derivative to maximize yield in the DeFi ecosystem.
FrxETH will act as ETH pegged stablecoin, and the peg will be soft in the beginning, according to the founder of Frax. However, it will lean towards a tight peg after the Shanghai update which is expected to take place in early 2023, enabling withdrawals of the staked ETH.
There are already many platforms in liquid staking space. FrxETH can create a difference if they create an ETH/frxETH pool on Curve Finance and provide a better yield than 5% ETH staking yield by bribing Curve with CRV holdings. Because Frax is one of the big players in Curve wars, they are invested in CRV to support their plan. Additionally, frxETH will be used in other products on Frax, like Fraxlend, a lending product on Frax.
The team expects better yield for frxETH because of the additional usage on the Frax ecosystem instead of only staking fees and block rewards. Moreover, the adoption of Frax looks like it is increasing recently, as you can see from the numbers below.
Social mentions: +35.9% in 3M, -37.3% in 1M, +117.5% in 1W
Social engagements: +46.2% in 3M, +15.1% in 1M, +41.5% in 1W
You can read the conclusion our FA specialist wrote in the trade Letter! In the Trade Letter, we also did the same FA analysis on $METIS!
Technical Analysis
We will take a look at the 1-day timeframe
When you look at the price action of FXS on we can see that we are moving sideways. These times of consolidation are often used by the bigger players to accumulate their positions. To determine if people are accumulating this specific coin, it is important to take a look at the volume indicator.
Huge spikes in buying volume could indicate that people are buying this asset and that they are accumulating a position. The volume indicator shows us some very big spikes in buying volume which could be very interesting.
The technical part of the chart shows us that we are facing a resistance area. If we want to maintain the upwards momentum it is important to gain the area of $7.00-7.70. When we see a rejection at these prices, it is likely that we are headed towards the high timeframe support level of $4.77-5.14.
In the Trade Letter we also took a look at the 4-hour Timeframe and $FXS-$BTC on the 1-day Timeframe!
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