In a move to strengthen its token buyback strategy, Frax Finance’s founder, Sam Kazemian, has expressed his support for a proposal put forth by Ouroboros Capital, a cryptocurrency investment research firm.
The proposal aims to adopt a more aggressive approach to purchasing and burning Frax Share (FXS) tokens as the price of FXS experiences downward fluctuations.
Frax Share (FXS) is renowned for its existing buyback strategy, wherein the project acquires and burns a predetermined amount of FXS tokens within a specific timeframe, regardless of price variations. To facilitate this strategy, Frax Finance has allocated a $20 million fund.
Ouroboros Capital’s proposal, presented on June 16, suggests implementing a time-weighted average price (TWAP) buyback program worth $1 million whenever the FXS price falls below $5.
Additionally, if the price dips further, dropping below $4, the proposal advocates for an additional $1 million buyback program lasting one month. The key objective of these initiatives is to purchase a larger quantity of FXS tokens for subsequent burning as the price continues to decline.
Kazemian expressed his belief that the most effective use of Frax Finance’s revenue and capital is to invest in the buyback and subsequent burning of FXS tokens. Given the current low valuations prevalent in a mature cryptocurrency ecosystem influenced by macro market conditions and the global economy, Kazemian emphasized the importance of optimizing capital allocation.
The Frax Finance founder concurred with Ouroboros Capital’s suggestion to accelerate the TWAP mechanism as the FXS price decreases further, with the proposal outlining buybacks at price thresholds of $4, $3, and $2. “If the price continues to fall, we should buy back more tokens more aggressively,” Kazemian added.
The adoption of this proactive token buyback strategy signals Frax Finance’s commitment to maintaining the value and stability of FXS in response to market dynamics. By repurchasing and burning tokens during periods of price decline, Frax Finance aims to bolster investor confidence and support the long-term growth of the project.
As Frax Finance moves forward with the implementation of the proposed buyback strategy, market participants will be closely observing the impact of these measures on the value and utility of FXS tokens, anticipating a positive response from the cryptocurrency community.