Cryptocurrency research firm, Ouroboros Capital, has proposed a more dynamic token buyback strategy that has piqued the interest of Frax Finance's founder, Sam Kazemian. The proposal aims to better leverage price fluctuations in the Frax Share (FXS) token to optimize the efficiency of the current buyback and burn campaign.
Frax Finance's existing buyback protocol involves acquiring and burning a specific quantity of FXS tokens over a predetermined duration, irrespective of the prevailing price of the token. The company has set aside a fund of $20 million specifically for this operation.
However, the recent proposal put forth by Ouroboros Capital on June 16 recommends a more responsive buyback strategy, implementing a time-weighted average price (TWAP) mechanism. As per the new model, if the price of the FXS token drops below $5, an immediate TWAP buyback of $1 million would be triggered. In case the FXS price plunges further to below $4, an additional TWAP buyback of $1 million, distributed over a month-long duration, is recommended. The basic philosophy here is to amplify the procurement of FXS tokens for burning when the price is declining.
This proposal has been made during a period when the FXS price, currently hovering at $5.30, is nearing the critical $5 threshold, as per data from CoinGecko.
Voicing his endorsement for the new strategy, Sam Kazemian commented, "I firmly believe that the most prudent use of our revenue and capital is to purchase and incinerate the FXS supply. Considering the low market valuations amidst a mature ecosystem due to macroeconomic factors and the global economic state, I cannot foresee a more productive utilization of our resources.”
