Frax Finance Founder Sam Kazemian expressed support for Ouroboros Capital’s proposal for a more aggressive buyback strategy for Frax Share (FXS) tokens.
About a year ago, the DeFi protocol community approved the creation of a $20 million fund in the FRAX stablecoin for discretionary purchases of FXS through the TWAMM program. The aim of the initiative is to acquire the token at discounted prices and maintain its market value.
Until recently, the project used only $2 million of the allocated funds for these purposes. On June 15, Kazemyan created a new order to sell $2 million in FRAX for FXS over the next six months. This happened against the backdrop of a fall in the price of the token to levels 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 has responded to the relaunch of the program with a proposal to optimize FXS purchases under TWAMM. The company noted that the accumulation of tokens by the project solves two main tasks:
- maintaining the value of the asset;
- signaling to the market about the minimum acceptable price of FXS.
The firm noted that historically, token buybacks have been most effective in the $4-5 price range. Over the past 12 months, FXS has been at these levels for approximately 74 days, or 20% of the time.
“We cannot effectively lock in value if TWAMM is spread over a period of, say, 6 months,” the company said.
Ouroboros Capital offered to buy $1 million worth of FXS during the month when quotes drop to $5, and allocate an additional million when it falls to $4. Purchases are supposed to be suspended after reaching the minimum price.
Kazemian, in a comment, agreed with the general idea that “TWAMM should accelerate if the price ever drops to $4, $3, or $2.” He also supported the slowdown of the program with the growth of quotations. At the same time, Kazemyan called for “certain leeway” on the program due to a number of unknown parameters, such as the duration of the bear market.
“It would not be wise to quickly spend all the allocated funds and then sit back while FXS continues to trade at discounted prices. Simply put, the ransom under the protocol is limited, and we do not have endless “dry powder”. The duration of adverse factors is finite, but the duration of their impact is unknown, ”said the founder of Frax Finance.
Against the backdrop of the resumption of the TWAMM program, the project token has risen in price by 7% over the week (CoinGecko). The coin is trading at levels around $5.4. Of the total supply of ~99.7 million FXS, 72.4 million tokens are circulating on the market.
Recall that on June 16, Kazemyan spoke about the project’s plans to launch its own second-level Ethereum network by the end of the year.
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