Frax founder backs a more aggressive Frax Share buyback

Frax Finance founder Sam Kazemian expressed support for Ouroboros Capital’s proposal, which envisages a more aggressive Frax Share (FXS) buyback strategy.

Approximately a year ago, the DeFi protocol’s community approved the creation of a $20 million stablecoin FRAX fund for discretionary purchases of FXS under the TWAMM program. The aim of the initiative is to acquire the token at discounted prices and support its market value.

Until recently, the project had used only $2 million of the allocated funds for these purposes. On June 15, Kazemian placed a new order to sell FRAX for $2 million in FXS over the next six months. This occurred as the token’s price fell to near two-year lows.

THIS WEEK IN FRAX — June 16th, 2023

? History repeats itself! ?@samkazemian signals a $2m FRAX → FXS TWAMM Buyback in the main chat. The Buybacks have started once again!

The last time this happened, it marked the bottom of FXS.https://t.co/9xSfGjLipI pic.twitter.com/UaoettGey0

— FlywheelDeFi.eth (@FlywheelDeFi) June 16, 2023

The Ouroboros Capital team responded to the restart of the program with a proposal to optimise FXS purchases within TWAMM. The firm noted that accumulating tokens for the project addresses two main objectives:

• Maintaining the asset’s price;
• Signalling to the market the minimum acceptable price for FXS.

The firm noted that historically buybacks have been most effective in the $4-5 price range. Over the past 12 months, FXS has spent about 74 days at these levels, or around 20% of the time.

«We cannot effectively lock in an advantageous price if the TWAMM is spread over a period, for example, six months», — stated the company.

The Ouroboros Capital proposed buying $1 million worth of FXS over a month when quotes fall to $5, with an additional $1 million allocated if the price drops to $4. Purchases would be paused after the minimum price is reached.

In a comment, Kazemian expressed agreement with the overall idea that “TWAMM should accelerate if the price ever falls to $4, $3 or $2.” He also supported slowing the programme when quotes rise. At the same time, Kazemian argued for “some freedom of action” in the programme due to a number of unknown parameters, such as the duration of the bear market.

«It would be unwise to spend all the allocated funds quickly and then sit on your hands while FXS continues to trade at depressed prices. Put simply, buybacks under the protocol are capped, and we do not have infinite ‘dry powder’. The duration of adverse factors is finite, but the timing of their impact is unknown», said the founder of Frax Finance.

Against the backdrop of the TWAMM restart, the project’s token rose 7% over the week (CoinGecko). The token trades at around $5.4. Of the total supply of about 99.7 million FXS, 72.4 million tokens are in circulation.

On June 16, Kazemian said that the project plans to launch its own Ethereum Layer-2 network by the end of the year.