I do agree that the FRR acts as a damper...but who is to say it wouldn't work the same way in reverse? It is not inherently downward pressure, it is simply a damper on movements in general. If we were in a huge bull market, a real one, like the rise to 1200, wouldn't the FRR stop the rates from falling as more and more fixed rates were taken above the FRR?
I'm not sure I follow you there - fixed rate swaps above FRR don't get taken unless there's enough demand to get the amount offered at FRR down to near-zero.
After a big rise in demand that pushes the going rate up high, the FRR might continue to stay high for a while as the average slowly descends, but it wouldn't be able to resist downward motion.
Hm, unless there were a huge body of swap
demands placed at FRR, enough to keep all the 'passive' swap providers' funds occupied and make it difficult for a trader to get funding unless they go over the top and place their demand higher than FRR. But I feel like that's an unlikely scenario in all but the most extreme cases. Would only be a possibility in the absolute hyper-manic phase of a bubble (or the equally hyper-manic period during the 'first bounce' out of a crash, where people line up to place bets on the bubble resuming), whereas FRR as-is seems to have it's typical rate-depressing effect even in times of small-to-moderate price rises.
To some extent, I'm happy to see the rate collapse - hopefully, it'll make BFX realize everything that is wrong with FRR as their cut from the lending fee is drastically reduced as well despite total swaps only being reduced by a small fraction! Hopefully, that'll get the ostrich's head out from the sand!