Frax Share (FXS) has been one of the few altcoins to pull off a dominant price performance amid the down market of late 2021 to early 2022. In the month between Dec. 14 and Jan. 14, FXS was up 128% against the U.S. dollar and 159% against Bitcoin (BTC). In dition to this impressive feat, FXS topped the charts of historically bullish tring conditions on multiple occasions throughout this period. What is behind the token’s recurring strong tring outlook?
Governing a stablecoin ecosystem
FXS is the utility token underpinning the Frax ecosystem — a stablecoin protocol that seeks to occupy a middle ground between entirely collateralized and entirely algorithmic stablecoins, thus harnessing the vantages of both designs.
In accordance with the protocol’s highly “governance-minimized” approach to its architecture, there is a limited set of parameters that the community gets to just using the token. These include refreshing the rate-of-collateral ratio — i.e., the share of the protocol’s FRAX stablecoin that is stabilized either algorithmically or through collateralization — in dition to ding collateral pools and justing various fees.
FXS’ supply is initially capped at 100 million tokens, and the protocol is designed for the token supply to be deflationary as the demand for the FRAX stablecoin rises. This mechanism could be responsible for at least some portion of FXS’ momentum in recent weeks. As Cointelegraph previously reported, FRAX ded 300% to its circulating supply between late October and late December.
Curve Wars winner
Because of this link between the demand for FRAX and the corresponding shrinkage in the supply of FXS, rounds of FRAX option can theoretically result in waves of FXS appreciation. Evidence supporting this hypothesis can be found in several recent instances of the decentralized finance (DeFi) community opting the stablecoin.
For one, FRAX’s dition to the Convex Finance platform, where several major DeFi protocols compete for voting rights that can be leveraged to increase their respective stablecoins’ yield, preceded a major spike in the FXS token’s price.
Interestingly, many of such FXS rallies, apparently inspired by major FRAX option events, produce recurring patterns of tring and social activity that get detected by Cointelegraph Markets Pro’s algorithmic indicator, the VORTECS™ Score. This AI-driven tool is trained to sift through tokens’ historical performance data, looking for familiar combinations of variables such as price movement, tring volume and Twitter sentiment that have systematically preceded dramatic price movements.
Green means go
Here, for example, is the chart of FXS’ VORTECS™ Score vs. price from the week that FRAX was ded to Convex Finance. The indicator flashed an ultra-high Score more than one full day ahe of the token’s powerful price spike.
VORTECS™ Score (green/gray) vs. FXS price, Dec. 17 – 24. Source: Cointelegraph Markets Pro
Scores above 80 conventionally indicate the algorithm’s solid confidence that the conditions around the assets are historically bullish, while those beyond 90 suggest extremely high confidence. In this case, on Dec. 20, with FXS’ price remaining largely flat, the token’s VORTECS™ Score exploded, reaching an impressive value of 96 (red circle in the chart). Thirty-two hours after the peak Score, FXS’ price shot up from $13.96 to $18.27 in just 18 hours.
In the weeks that followed, FXS’ VORTECS™ Score peaks kept coming ahe of price spikes. Earlier this week, two streaks of Scores above 80 foreshowed two phases of explosive price action, including the one that saw the asset hit a weekly high of $41.72.
VORTECS™ Score (green/gray) vs. FXS price, Jan. 6 – 13. Source: Cointelegraph Markets Pro
Not many digital assets display high VORTECS™ Scores so frequently. Furthermore, CT Markets Pro’s internal research shows that tokens can widely vary in the degree to which historically favorable conditions anticipate their actual price movement. Apparently, what is happening in the case of recent FXS rallies is that the forces driving the waves of the token’s appreciation are similar, leing to a familiar arrangement of tring and social metrics that the VORTECS™ algorithm captures so well.
Of course, the relationship between historical precedent and subsequent price action is not always this smooth. Yet, in many cases, this tool — capable of parsing years’ worth of assets’ performance data — can be massively useful for crypto trers.
Cointelegraph is a publisher of financial information, not an investment viser. We do not provide personalized or individualized investment vice. Cryptocurrencies are volatile investments and carry significant risk, including the risk of permanent and total loss. Past performance is not indicative of future results. Figures and charts are correct at the time of writing or as otherwise specified. Live-tested strategies are not recommendations. Consult your financial viser before making financial decisions.
META ARTICLE: Here is how one algorithmic indicator anticipated multiple phases of FXS’ protracted rally PUBLISHED: 2022-01-14 13:11:33 SOURCE: https://cointelegraph.com/news/here-is-how-one-algorithmic-indicator-anticipated-multiple-phases-of-fxs-protracted-rally