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FXS Price Poised For Uptrend As Frax Finance Unveils Roadmap To Reach $100B TVL

Frax Finance, a decentralized finance (DeFi) protocol, recently unveiled its Singularity Roadmap. It aims to propel the total value locked (TVL) of its layer 2 blockchain, Fraxtal, to $100 billion by the end of 2026. This notable surge would represent a 760,000% increase from the current TVL levels, which stand at $13 million. 

Frax Finance Singularity Roadmap

According to the protocol’s announcement, Fraxtal, the substrate that powers the Frax ecosystem, serves as Frax Finance’s operating system. With the launch of Fraxtal and achieving an effective 100% Collateralization Ratio (CR), Frax Finance claims to have consolidated its core product offerings. 

To reach the ambitious $100 billion TVL goal, the protocol has announced that it has already generated over $45 million, reaching the coveted 100% CR. 

As announced, with this milestone achieved, the FRAX stablecoin, which has remained relatively dormant during the process, and the FXS revenue share, which has been temporarily reduced by 90% to conserve assets, can now undergo a “transformative change.” 

In addition, the upcoming introduction of Layer 3s (L3s) on Fraxtal is expected to be a key factor in further contributing to the growth and adoption of the protocol.

Fraxtal, which is built on the Optimism (OP) network, stands out as one of the most widely used layer 2 solutions on top of Ethereum (ETH), according to the protocol. The Frax team says it has developed its underlying incentives to provide a seamless experience for developers and users, further encouraging adoption. 

In particular, by owning the entire stack, Frax can introduce advanced features such as account abstraction, new precompiles, privacy features, aggregated decentralized applications (dApps), and interoperability with Superchain. 

The protocol believes these features will enhance the on-chain experience, making Fraxtal the “preferred” platform for holding, staking, and transferring crypto assets.

Expansion Strategy

The proposal also unveils Frax Finance’s plan to establish 23 Layer 3s within 365 days, kicking off the “Fraxtal Nation” community. By supporting these 23 chains with developer access, incentives, and investment, Frax aims to foster a positive-sum approach and provide additional support to official partners. 

The protocol also suggests that these partners will receive “substantial allocations” of FXTL points, aiming to solidify the role of the FXS token as the ultimate beneficiary of the Frax ecosystem.

Moreover, Frax Finance founder Sam Kazemian intends to allocate 50% of the revenue from protocol fees to veFXS token holders. In comparison, the remaining 50% will be used to acquire FXS and other Frax assets for pairing in the FXS Liquidity Engine (FLE).

This initiative will increase liquidity, strengthen the Frax balance sheet, and provide additional incentives for the protocol’s stakeholders.

Frax Finance’s proposal also seeks to reactivate the protocol fee switch, which was temporarily turned off during the consolidation phase of the protocol. 

By reigniting this switch, a portion of the yield generated from protocol fees will be directed toward veFXS token holders. veFXS, or veiled FXS, represents a locked version of the native token, FXS, and offers enhanced voting power and participation in the Frax ecosystem.

Frax Finance

As of the time of writing, FXS has not responded favorably to the news. Its current trading price is $6.93, reflecting a 3.5% loss in the past 24 hours. It is important to note that the proposed protocol features are still in development, and the impact on the Frax Finance ecosystem and the token’s performance is yet to be determined.

Featured image from Shutterstock, chart from TradingView.com

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

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

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.

Frax FXS price

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).

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