Floodgates are about to Explode, Turning on Frax’s fee Switch! -Cryptovestor's Alpha Corner #13

March 12, 2024
Floodgates are about to Explode, Turning on Frax’s fee Switch! -Cryptovestor's Alpha Corner #13

Hey Fraximalists, it's been a crazy couple of weeks with ETH Denver going on and the recent launch of Fraxtal, Frax’s new L2 chain. The launch, on the 6th of March, went so smooth, most people didn’t even notice! But it's up, it's running and from what I hear its super-fast and smooth to use. We’ve already seen a few meme coins launch on the chain which always seems to be a positive sign of its viability and success, j/k. Anyway, rather than talk more about Fraxtal, I decided to go deeper into what I see is the next big move by Frax, the “flipping on” of the fee switch to veFXS lockers and cvxFXS stakers! 

Yea, you heard me right, to me it seems like this has been well orchestrated and planned out by the Frax team and it's just flying right under our noses. You see, I started noticing less incentives from Frax on Votium a few weeks ago with no real rhyme of reason. Just less spent dollars as we marched closer to Fraxtal's launch date, then just a few days ago Uniswap decided to turn on their fee switch, something I thought I would never see. Shortly after that, without missing a beat, Sam K. hints at Frax flipping the fee switch on!

We are getting very close to a collateralization ratio of 100%, basically this is when each Frax in circulation is 100% backed by crypto assets. Because of the recent positive price action from FXS, CVX and CRV in recent days, we are at 99% CR at the time of writing this article. So, all it would take is one more pump before fees can finally flow to FXS lockers! In addition, the frugal nature of Frax on their vote incentives confirms that this is their plan. They want to conserve as much funds as they can to make it easier to push the threshold over 100%!

Once this happens, which I expect will be soon, maybe just a matter of days or weeks, you will see the floodgates open. 8 figures (~$80,000,000), of which Frax generates in revenue, would start to move to long time FXS lockers. 

This will cause more demand for FXS as it becomes a premium yield bearing asset. Users who don’t want to lock FXS for 4 years can buy and stake cvxFXS to earn the fees.  More demand for cvxFXS, means it's cheaper to buy and lock FXS into Convex! Creating more demand for FXS while reducing its circulating supply. And the flywheel goes round and round! 

Keep your eyes on the CR and for any new governance proposals! It's about to reach 100% and the rest is going to be history for Frax Finance!

Update 1: It looks like the crypto markets are heading higher this morning and the Uniswap fee switch did not pass governance! I have a feeling that wont happen to Frax!

Update 2: It looks like an FIP to turn on the fee switch was just released as I was finishing this article!!! Click here for more details!

Sams response:

Mic drop!


Follow me @Cryptovestor77 on X for 24/7 Alpha on the Curve and Frax and now the f(x) Ecosystems.

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