Ethereum-Based Frax Finance (FXS) Is Up 64%, Is There Still Opportunity?

Jake Simmons

2 years ago

3 mins read

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In the last seven days, the Ethereum-based project Frax Finance is the second biggest winner within the top 100 cryptocurrencies by market cap. With a price increase of 64%, the FXS token is only behind Decentraland (MANA), which has surged 76% within the same period.

With the massive pump, Frax Share Token (FXS) has moved up to the 63rd position in the ranking by market cap and has seen a bullish rally since January 2. While the price was $4.09 on that day, FXS was at $9.06 at press time.

When the price briefly rose above $10 yesterday, the gain was over 140% since January 2. In the 1-day chart, FXS has broken the resistance zone established in May last year between $7.40 and $8.20 and is now facing resistance at $10.02.

The first two attempts to break this resistance have failed for now, so a retest of the former resistance zone could be on the cards before the Frax token continues to rally. This would also be a much-needed correction, as the RSI on the daily chart is still at 83.

Frax FXS price — FXS price, 1-day chart | Source: FXSUSD on TradingView.com

The weekly chart confirms the extremely bullish picture for the FXS token. Once the price consolidates in the daily chart and subsequently breaks the $10.02 level, the way would be clear for a rise toward $13.

The price level served as strong support in November and December 2021, before FXS rallied to an all-time high of $52.80 in January 2022.

What Do The Fundamentals Of Frax (FXS) Suggest?

As NewsBTC reported, Frax Finance is benefiting from the liquid staking (LSD) narrative that emerged earlier this year and has since caused all LSD tokens to skyrocket. However, it is questionable whether the hype can continue for a longer period of time.

As Jordi Alexander, CIO of Selini Capital explained, the Ethereum Shanghai hard fork could be in for a rude awakening:

ETH staking is going to explode after the Shanghai fork allows withdrawals- esp. now as Metamask integration makes it easy for Dummies. But LSD tokens are overvalued in anticipation of this – revenue is not going to change much, bc reward yields will plunge as staking % goes up.

But analyst Thor Hartvigsen doubts whether the same will be true for Frax Finance. The analyst shared five reasons via Twitter why Frax Finance will be a key player in DeFi this year.

The first reason is that Frax offers the largest APR among liquid staking providers at 6-10%, while its nearest competitor is only around 5%. The main reason for this difference is that frxETH can be used in DeFi applications such as the ETH/frxETH Curve pool.

The second reason Hartvigsen cites is that Frax Finance has made extensive improvements since its inception, in particular, it has improved its model (FRAXV2) and “has become a huge liquidity engine with a range of products.”

These include algorithmic market operations (AMOs), FraxSwap, FraxLend, FraxFerry (native bridge design), ETH liquid staking, and FPI (US inflation rate linked stablecoin).

¤ Frax Finance has been crushing it lately🔮

And with their growing ecosystem of DeFi products, $FXS has a TON of upside in 2023.

Here are 5 reasons why @fraxfinance will be a central player in DeFi this year and how you should be taking advantage of this 🧵 1/19 pic.twitter.com/epFMEgY4HF

— Thor Hartvigsen (@ThorHartvigsen) January 17, 2023

Third, it’s the AMOs that make Frax special, as they don’t just let collateral sit dormant, but use it in various DeFi applications. It also offers some of the highest stablecoin yields, which significantly strengthens FXS by increasing liquidity on Curve.

Last but not least, Hartvigsen points to Frax’s roadmap to reach a market cap in the trillions and become the risk-free underlying in DeFi. The analyst touts the Fed Master Account (FMA) as the biggest innovation:

A FMA is dollars deposited directly into the FED treasury’s ledger and grants access to US Treasuries. The FED gives a status on the ledger once a day which essentially is the ultimate audit.

This would make FRAX one of the closest things to a ‘risk free dollar’. It’s a very ambitious goal however and likely a few years away.

Featured image from Inside Out, Charts from TradingView.com

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

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