Here is how one algorithmic indicator anticipated multiple phases of FXS’ protracted rally

Frax Share (FXS) was one of the few altcoins with a dominant price performance amid a bear market in late 2021 to early 2022. In the month between December 14 and January 14, FXS is up 128% against the US dollar and 159 % vs Bitcoin (BTC). In addition to this impressive feat, FXS has topped the charts for historically bullish trading conditions on multiple occasions during this period. What is behind the strong recurring trade outlook for the token?

Manage a stable currency ecosystem

FXS is the utility token that underpins the Frax ecosystem – a stablecoin protocol that seeks to occupy a middle ground between fully secured and fully algorithmic stablecoins, thus taking advantage of the advantages of both designs.

Due to the largely “governance mini” approach of the protocol in its architecture, there is a limited set of parameters that the community has to modify with the token. This includes updating the collateral rate ratio – the share of the protocol’s stablecoin FRAX that is fixed either by algorithms or by collateral – as well as adding collateral groups and adjusting various fees.

FXS’s supply is initially set at 100 million tokens, and the protocol is designed so that the token supply is deflationary as demand for the FRAX stablecoin rises. This mechanism may be responsible for at least part of the momentum of FXS in recent weeks. As previously reported by Cointelegraph, FRAX added 300% to the circulating supply between late October and late December.

Curve Wars Winner

Because of this correlation between demand for FRAX and a corresponding contraction in FXS supply, FRAX adoption rounds could theoretically lead to waves of FXS value appreciation. Evidence supporting this hypothesis can be found in many recent cases where the decentralized finance (DeFi) community has adopted stablecoins.

For example, the addition of FRAX to the Convex Finance platform, where several major DeFi protocols are vying for voting rights that can be leveraged to increase returns for their stablecoins, preceded a significant rise in the price of the FXS token.

Interestingly, many of these FXS spikes, apparently inspired by major FRAX adoption events, produce recurring patterns of trading and social activity that are detected by the Cointelegraph Markets Pro algorithmic indicator, VORTECS™ Score. This AI-powered tool is trained to sift through historical performance data of tokens, looking for familiar combinations of variables such as price action, volume and Twitter sentiment that systematically preceded dramatic price movements.

Green means go

Here, for example, is the graph of FXS’s VORTECS™ score against price from the week that FRAX was added to Convex Finance. The indicator is flashing a very high result more than a whole day before the strong rise in the price of the token.

VORTECS™ result (green/grey) against FXS price, December 17-24. Source: Cointelegraph Markets Pro

Scores above 80 traditionally indicate strong algorithm confidence that conditions surrounding the asset are historically bullish, while those above 90 indicate extremely high confidence. In this case, on December 20th, with FXS price largely flat, the token’s VORTECS™ points exploded, reaching an impressive value of 96 (red circle in the chart). After 32 hours of the pips peak, FXS price went from $13.96 to $18.27 in just 18 hours.

In the weeks that followed, the peaks of FXS VORTECS™ continued to advance ahead of price spikes. Earlier this week, two sets of scores above 80 predicted two phases of explosive price action, including one that saw the asset rise to a weekly high of $41.72.

VORTECS™ result (green/grey) vs FXS price, Jan 6-13. Source: Cointelegraph Markets Pro

Not many digital assets display high VORTECS™ scores frequently. Furthermore, CT Markets Pro’s internal research shows that coins can vary widely in the degree to which historically favorable conditions predict actual price action. Obviously, what happens in the case of recent FXS spikes is that the forces driving the waves of currency appreciation are similar, resulting in familiar trading rankings and social metrics that the VORTECS™ algorithm captures well.

Of course, the relationship between historical precedent and subsequent price action is not always so smooth. However, in many cases, this tool – which is able to analyze asset performance data – can be of great help to cryptocurrency traders.

Cointelegraph is a financial information publisher, not an investment advisor. We do not provide personal or individual investment advice. Cryptocurrencies are volatile investments and involve significant risks, including the risk of permanent and complete loss. Past performance is not indicative of future results. Figures and graphs are correct at the time of writing or as otherwise specified. Directly tested strategies are not recommendations. Consult your financial advisor before making financial decisions.

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