Frax’s governance token FXS is in stasis as the decentralized finance protocol’s emerging high-yield staking product attracts millions in investor money.
On Thursday, Frax unveiled sFRAX, an ERC4626 staking vault that allows holders of the protocol’s partially collateralized fractional-algorithmic stablecoin FRAX to earn returns equivalent to the U.S. Federal Reserve’s (Fed) Reserve Balance Interest Rate (IORB), currently around 5.4%.
The product debuted with a 10% APY and eventually converged with the Fed’s 5.4% IORB rate. According to Dune Analytics, more than 150 users have deposited more than $35 million into the vault so far.
The price of FXS rose 7% to $5.66 on Thursday, but has since fallen back to $5.49, indicating a 0.5% gain on a 24-hour basis, CoinDesk data showed. The steady price action matches the continued low volume range among market leaders bitcoin and ether.
The new offer comes as a lending protocol. MakerDAO enjoys a first mover advantage in capitalizing on high interest rates in the US. According to Parsec Finance, MakerDAO has invested more than $2 billion in short-term bonds via offchain structures since February 2022, delivering a 5% savings. interest on DAI and buy back its MKR token.
On a year-over-year basis, MKR has gained more than 168%, easily surpassing bitcoin’s 62% gain. FXS has only gained 32% this year. Some in the crypto community expect FXS to overtake MKR.
“Impressive growth from sFRAX with $24.6 million allocated to Frax Finance’s FinresPBC short-term US Treasuries strategy currently yielding 10%. FXS plans to make an MKR catch-up trade and restart protocol income at the risk-free rate of 5, 25%,” McKenna, pseudonymous founder of founder of Arete Research, said on X.