I have already made numerous posts covering why we are so bullish on CRV, this morning I will cover our bull thesis on FXS. Buckle up.
The Frax $FXS Thesis
1/ For sovereign nations, a central bank exists to control the supply and cost of money & credit via various monetary policy operations
The operations impact market-wide interest rates, liquidity, and asset prices.
These operations can mostly be distilled down to directly buying/selling securities, setting reserve requirements, and setting interest rates for borrowing/lending
Basically, the Central Bank controls the economy
2/ Buying securities (bonds), lowering reserve requirements, and lowering borrowing rates generally are conducive to market wide effects of lowering cost of capital, increasing liquidity, and increasing asset prices. We've seen this play out over the past few years Frax has developed a stablecoin protocol that has the potential to have a similar level of control over the entire crypto economy through its modularized design and unique AMO innovations
3/ What is an AMO?
See docs: docs.frax.finance/amo/overview
These AMOs allow for the protocol to algorithmically mint/burn $ while maintaining peg stability to generate income for the protocol, increase liquidity for FRAX paired assets, and influence interest rates for crypto money markets
4/ Income Generation
Normally, FRAX generates income from farming with its collateral. But if FRAX trades above peg, extra FRAX can be minted to both stabilize the peg and be staked in farms~$80m profit has been generated over the past 6 months
FRAX can be minted to provide deep liquidity for both other stablecoins, and also non-stable assets. Frax currently provides 9 figures of liquidity via programs like Frax-as-a-service and its Tokemak Reactor