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Frax share price prediction: A struggling governance token

By Capital.com Research Team

14:10, 24 August 2022

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In this article:
FXS/USD
FXS/USD
10.4583 USD
-0.2633 -2.550%
BTC/USD
Bitcoin / USD
23403.15 USD
-45 -0.190%
SUSHI/USD
SushiSwap / USD
1.5331 USD
-0.024 -1.560%
USDC/USD
USDC/USD
1.0206 USD
-0.0005 -0.050%
USDT/USD
USDT/USD
1.0001 USD
-0.0001 -0.010%

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The Frax Share logo on a phone, which is in front of a price graph
Frax share is the governance token for an algorithmic stablecoin ecosystem – Photo: photo_gonzo / Shutterstock

Algorithmic stablecoins made headlines earlier this year after Terra’s UST coin depegged and sent shockwaves across the crypto market. Frax Protocol is looking to escape the market’s hostility to these cryptos with its stablecoins that combine algorithmic technology with collateral. 

But this has not stopped its governance token frax share (FXS) from plummeting since the Terra crash. 

At the time of writing, FXS is showing some signs of recovery.

What is frax share (FXS)?

The Frax Protocol is an ecosystem designed for stablecoins, which are assets that combine the stability of traditional currencies with the decentralisation of cryptos. The goal of Frax in particular is to create “highly scalable, decentralised, algorithmic money in place of fixed-supply digital assets like BTC”. 

Frax (FRAX) was the platform’s first stablecoin, which is pegged to the price of a US dollar. It describes itself as a fractional algorithmic stablecoin as part of it is backed by collateral and the other part algorithmically adjusts the supply.

Its CoinMarketCap entry explains: “The ratio of collateralised and algorithmic depends on the market’s pricing of the FRAX stablecoin. If FRAX is trading at above $1, the protocol decreases the collateral ratio. If FRAX is trading at under $1, the protocol increases the collateral ratio.” 

Since its successful launch, the protocol has created another stablecoin under the ticker FPI. This is pegged to the Consumer Price Index, making it the “first stablecoin pegged to a basket of consumer goods”.

A dual token system

The protocol was created with a dual-token system in mind. While Frax is the stablecoin, frax share (FXS) is the volatile governance token. It gives holders the rights to have a say over certain protocol decisions.

It describes this process as a “DAO [decentralised autonomous organisation]-like active management, such as MakerDAO”, according to the supporting documentation for frax share. There are only a few parameters for the community to manage, meaning there is less to disagree on. 

As well as voting, FXS investors gain the opportunity to earn passive income. The token holders gain the fees, revenue and excess collateral on the platform. 

FXS price history

FXS price chart

FXS went live at the end of 2020 with CoinMarketCap listing the token at an opening price of $3.90 on 27 December. Frax share saw its first surge in January 2021 as SushiSwap (SUSHI) listed the protocol’s stablecoin and gave investors a chance to earn FXS yield. It peaked at $29.26 on 16 January.

The cryptocurrency consolidated over the following months and crashed below its launch price. It took until November before FXS saw another breakout. This came as a partnership with RomeDAO was announced.

BTC/USD

23,403.15 Price
-0.190% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 60.00

XRP/USD

0.41 Price
-1.030% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.00327

LUNC/USD

0.00 Price
-0.510% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee -0.0500%
Overnight fee time 22:00 (UTC)
Spread 0.00000790

DOGE/USD

0.10 Price
-1.840% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.0012109

Frax share hit $27.09 on 12 November and continued climbing into the new year, defying the wider bearish market. This corresponded with a surge of Frax’s total value locked (TVL), which peaked at $2.48bn on 3 March 2022, according to DeFi Llama.

FXS hit its all-time high of $42.67 on 3 April after the Terra blockchain announced a new pool. Titled 4pool, it included FRAX, UST, USDC, USDT.

However, frax share crashed along with the Terra ecosystem in May. By 18 June, the governance token had dropped below $4.

It has climbed slightly since this low. As of 23 August, frax share was trading at $6.41 and ranked 189th on CoinMarketCap.

Frax share price prediction round-up

The token’s volatile price history has led to some bullish FXS price predictions, at the time of writing. TechNewsLeader expected it could have hit $11.68 in a year and could have achieved a maximum price of $35.13 in five years’ time. Its frax share price prediction for 2030 said it could have reached a new high of $155.02. 

A similarly bullish forecast was provided by PricePrediction which said it could have averaged $8.46 this year. Its frax share price prediction for 2025 suggested it could have been priced at $25.96 and could have gone on to $244.16 in 2031. 

AMB Crypto’s frax share price prediction for 2022 outlined it could have just passed $20 by the end of the year. This upward trajectory was anticipated to continue and it was thought FXS could have reached $120 by 2030.

A more gradual frax share coin price prediction was offered by DigitalCoinPrice. It expected FXS to have averaged $8.26 this year and could have gone on to $12.32 by 2025. By 2030, it was thought the token could have reached just under $30. 

When considering a FXS token price prediction, it’s important to keep in mind that cryptocurrency markets remain extremely volatile, making it difficult to accurately predict what a coin or token’s price will be in a few hours, and even harder to give long-term estimates. As such, analysts and algorithm-based forecasters can and do get their predictions wrong.

If you are considering investing in cryptocurrency tokens, we recommend that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never trade with money that you cannot afford to lose.

FAQs

How many frax share coins are there?

As of 23 August, there was a circulating supply of just more than 16 million FXS.

Is frax share a good investment?

Frax share is a governance token designed for users to have a say over the stablecoin protocol. Holders will also gain access to rewards from platform fees and excess collateral.

In volatile cryptocurrency markets, it is important to do your own research on a coin or token to determine if it is a good fit for your investment portfolio. Whether the FXS token is a suitable investment for you depends on your risk tolerance and how much you intend to invest, among other factors. Keep in mind that past performance is no guarantee of future returns. And never invest money that you cannot afford to lose.

Will frax share go up?

There are some optimistic forecasts, such as TechNewsLeader which suggested FXS could have passed $150 by the next decade. In contrast, DigitalCoinPrice predicted it could not have exceeded £30 by 2030. However, forecasters are often wrong and frax share has proved to be a volatile asset.

In volatile cryptocurrency markets, it is important to do your own research on a coin or token to determine if it is a good fit for your investment portfolio. Whether frax share is a suitable investment for you depends on your risk tolerance and how much you intend to invest, among other factors. Keep in mind that past performance is no guarantee of future returns. And never invest money that you cannot afford to lose.

Should I invest in frax share?

As a Terra supported project, FXS has proved vulnerable to the recent crypto crash. However, it has recently shown signs of recovery.

Whether you should invest in frax share is a question that you will have to answer for yourself. Before you do so, however, you will need to conduct your own research and never invest more money than you can afford to lose because prices can go down as well as up.

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The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
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