Algorithmic stablecoins have faced their fare share of bad press after the collapse of the Terra ecosystem. However, Frax has managed to steer its protocol through the rough period and maintain eager investors.
Despite a recent exploit on the protocol’s website, FXS price predictions are optimistic that the cryptocurrency will continue to see growth.
What is the Frax Finance?
The Frax Protocol has marked its place in the cryptocurrency market as the first fractional-algorithmic stablecoin system. Developed as an open-source and permissionless platform, Frax operates entirely on the Ethereum blockchain, with potential for future cross-chain implementations.
The primary aim of the Frax protocol is to establish a scalable and decentralised alternative to fixed-supply digital assets like Bitcoin ($BTC), offering an algorithmic form of money.
At the heart of Frax’s innovation is its stablecoin, a unique digital currency designed to maintain a stable value. This stablecoin, known as FRAX, combines both collateralized and algorithmic elements in its supply.
The proportion of collateralisation versus algorithmic backing in FRAX varies in response to the market’s valuation of the stablecoin.
When FRAX’s market price exceeds $1, the protocol automatically reduces the collateral ratio, leaning more towards its algorithmic nature. However, if FRAX is trading below $1, the protocol increases the collateral ratio to reinforce its stability.
This dynamic system allows FRAX to adjust to market conditions while maintaining its peg to the US dollar.
Frax Finance has developed a robust decentralised finance (DeFi) infrastructure to take advantage of its innovative crypto technology. These different services were designed to enhance its ecosystem’s functionality and accessibility.
For example, Fraxswap is an automated market maker that stands out through its integration of a time-weighted average market maker (TWAMM). This feature is particularly useful for executing large trades over extended periods in a trustless manner.
Meanwhile, Fraxlend is a decentralised lending platform that facilitates trustless and permissionless lending activities. Unique to Fraxlend is its approach to creating isolated lending markets for any two ERC20 tokens.
The Role of FXS in Frax’s Token Ecosystem
Central to the Frax Finance ecosystem is its governance token, Frax Share. This token is rooted in its role for governing the platform. FXS token holders are granted voting rights, allowing them to participate in crucial decisions regarding the protocol’s future. This includes proposals on changes to the fractional-algorithmic ratio of the FRAX stablecoin, adjustments to the platform’s policies, and other governance proposals.
FXS is also integral to the stabilisation mechanism of the FRAX stablecoin. New FRAX are minted by utilising FRAX and $USDC. This mechanism is said to ensure that the stability of FRAX is not solely reliant on collateral but is also dynamically supported by the FXS token.
FXS’ price history
This governance token of the Frax Finance ecosystem went live at the end of 2020 as part of the wider Frax Finance ecosystem. From its first month of trading, stability was clearly not a key feature of FXS.
It launched at $3.90 on 27 December 2020, within the space of a month it skyrocketed to $27. A correction was imminent and it closed January 2021 back down at the $3 mark.
FXS’s next major rally came with the bull run at the end of 2021. It surpassed the $20 mark in November and continued climbing to $39 on 1 January 2022. FXS hit a new price record of $41.09 less than two weeks later.
Despite correcting around the $20 for the next few months, FXS soon climbed to its all-time high of $42.67 on 3 April. But this high was short lived.
The wider crypto market crashed after the collapse of Terra, another algorithmic stablecoin ecosystem. FXS fell back to $5, where it roughly stayed for the rest of the year.
Despite a temporary bump in price in January 2023, FXS’ price has been unable to breach the $10 level.
At the time of writing, FXS was trading at $7.44, up 3.55% in the past 24 hours and 6% in the previous week.
This is despite recent news that the protocol’s domain was hijacked at the beginning of November. The team behind the project has since managed to regain control with help from their domain registrar.
Frax Share price prediction
Despite the volatility and the protocol’s recent exploit, many FXS price predictions are optimistic about the cryptocurrency’s potential.
CoinCodex said there is current “bullish” sentiment with 25 out of 27 indicators pointing towards buy. Its Frax Share price prediction for 2023 said it will drop to $6.97 in five days’ time, before climbing back to $8.26 in a month.
Similarly, PricePrediction said it would average out at $8.28 this month. Its FXS token price prediction said it would climb above $12 next year and hit $17.15 by the end of 2025. The site’s Frax Share price prediction for 2030 anticipated a new all-time high of $116.57.
DigitalCoinPrice’s FXS coin price prediction was more bullish in the short-term. It anticipated an average price of $15.76 this year. The site’s Frax Share price prediction for 2024 said it would climb to $18.08 and hit $25.15 the following year. By 2030, the FXS crypto price prediction anticipated it to reach $75.08. The token was expected to surpass $100 the next year.
WalletInvestor’s Frax Share coin price prediction was much less bullish. It said FXS would come close to the $10 level in a year’s time. The site’s Frax Share price prediction for 2025 anticipated it to be $8.7 at the beginning of the year.
Should I invest in Frax Share?
It depends. Frax Share price predictions are fairly positive with the likes of DigitalCoinPrice anticipating new all-time highs. However, the cryptocurrency has previous experience high rates of volatility and you should never invest more than you can afford to lose.
Is Frax Share a good investment?
Frax Share was designed as a governance and utility token to support the fractional algorithmic stablecoin platform. Investors should be cautious and always conduct thorough due diligence.
Disclaimer: The information provided in this article is for informational and educational purposes only and should not be construed as financial advice. CoinNews and its authors are not financial advisors or experts. We recommend that you consult a professional financial advisor or conduct thorough research before making any investment decisions. Cryptocurrency investments carry a high degree of risk, and you should only invest an amount you are willing to lose. The opinions expressed in this article are those of the author and do not necessarily reflect the views of CoinNews or its affiliates.