If you’re in the crypto space you’ve probably heard of Ampleforth (AMPL). Maybe you know a thing or two about it too. Like that it’s a DeFi token, it’s a money/currency type of crypto, and that it has an elastic supply.
That’s what you know. Am I right?
While that’s good and all, knowing those things doesn’t make you understand Ampleforth and its $AMPL token. It’s far more complex, interesting, and sophisticated than what’s commonly known about it.
In fact, those who fully understand Ampleforth and $AMPL understand that it’s actually groundbreaking. They know its potential, they see the opportunity, and they’re taking action.
There’s a reason Brian Armstrong of Coinbase, Pantera Capital, True Ventures, and many more VCs are backing Ampleforth.
They know its potential, they know the facts, and they fully understand this revolutionary new type of cryptocurrency that is Ampleforth ($AMPL).
That’s why today, I lay everything out on the line. I present to you 7 must-know facts that will make you finally understand $AMPL so you can get on board with the brightest minds in crypto.
Let’s dive in.
1. Pioneer of Multi-Variable Assets (MVA)
Ampleforth is the first cryptocurrency with an elastic supply model where the total supply of $AMPL is subjected to expansion and contraction. It has also a natural state which I'll talk more about later on.
Therefore, not only does the price of $AMPL move freely but its supply moves freely as well, hence Multi-Variable Asset (MVA).
Other cryptos, like Bitcoin, have a fixed supply with a trackable rate of inflation; everyone knows there will only be 21M Bitcoin and we can see (and forecast) how many Bitcoin(s) will enter circulation.
This leaves only 1 variable that’s allowed to move freely: price.
Ampleforth has two variables that move freely: 1) price and 2) supply.
In essence, both Bitcoin and Ampleforth are cryptocurrency pioneers, each with a different monetary policy. Bitcoin’s monetary policy emphasizes scarcity with a fixed supply of money, while Ampleforth’s monetary policy emphasizes price stability with an elastic supply.
That said, most economists would consider Bitcoin’s monetary policy to have failed because it causes high price volatility making it unsuitable to be used as money, hence the narratives of Bitcoin being “digital gold” or the “ultimate treasury reserve asset”.
Ampleforth, on the other hand, has pioneered a new monetary policy (while remaining algorithmic, decentralized, uncollateralized, and censorship-resistant like Bitcoin) that supports price stability, resulting in a better money.
$AMPL’s pioneered characteristic of an elastic supply is the revolutionary thing that makes it stand out from the crowd. It’s a new variable other than price which suddenly changes its trading and price dynamics to support price stability rather than volatility.
This is how Ampleforth is able to grow its market cap from just $6M in June 2020 to $350M today (February 8, 2021) without its price chart showing a moon spike. The price of $AMPL has stayed relatively stable in a range while its market cap has exploded.
But don’t get me wrong here…$AMPL is not a stablecoin.
2. It's not a stablecoin
Despite what everyone says, Ampleforth’s $AMPL token is not a stablecoin. Period.
It gets called a stablecoin a lot, and you can't blame people for that, as $AMPL doesn't fit into any asset category we knew before, but it's really not a stablecoin.
Let me explain.
First of all, while the price of $AMPL stabilizes via its daily rebase mechanism that adjusts the supply up or down, the price isn’t pegged to any specific price or fiat currency. Rather the protocol seeks a price-supply equilibrium of around $1.02 by increasing or decreasing the supply of $AMPL.
Here’s how that works:
When the price of $AMPL is overvalued (above equilibrium) the protocol increases the supply which incentivizes $AMPL token holders to take advantage of their increased supply coupled with an “overvalued” price to take profits, which restores equilibrium on the demand side once the change in supply goes through.
This helps the price per $AMPL to cycle around $1.00.
You see, the price of $AMPL is determined by the free market where arbitrageurs buy or sell $AMPL when it's considered to be overvalued or undervalued by the market until the price reaches the equilibrium threshold.
Therefore, rebasing of the $AMPL supply doesn’t make $AMPL a stablecoin, it simply targets lower volatility than the likes of other cryptos like BTC and ETH using set rules.
Moreover, another reason $AMPL is not a stablecoin is:
“$AMPL is an independent financial primitive that does not rely on centralized collateral or lenders of last resort. It's like Bitcoin, except it can be used in contracts” – Ampleforth.org
Fiat collateralized stablecoins such as (USDC, USDT, etc.) rely on collateral provided by centralized banking partnerships so that their value is 100%+ backed.
Decentralized stablecoins like DAI rely on crypto collateral provided by stakers and cannot be sustained by free-market incentives alone and rely on periodic bailouts.
Based on these definitions, Ampleforth is different from both centralized and decentralized stablecoins for two reasons:
- The $AMPL token is not collateralized, it's like Bitcoin or Ethereum that way.
- $AMPL’s price and stabilization are 100% sustained by free-market incentives.
So yeah, I hope you now understand why $AMPL is not a stablecoin.
3. Rebase Fully Explained
Ok, now it's time for the juicy complicated stuff that nobody understands. But after you read what I got here, you will understand.
The Ampleforth protocol has a rebase mechanism that occurs every day at 10 pm EST at which time the supply of $AMPL automatically and proportionally adjusts across all wallets in response to demand.
As such, the number of $AMPL you own can change each day. Your balance can go up or it can go down.
So, how does the protocol measure demand? How does it know whether to increase or decrease the supply?
The Ampleforth protocol seeks equilibrium for its total supply. Equilibrium being a state when a change in demand results in a one-for-one change in supply. When the price of $AMPL is above equilibrium the supply increases and when it’s below the supply decreases.
The state of equilibrium for Ampleforth is when the price per $AMPL is around $1.00 USD.
If the market price of $AMPL during the rebase is higher than $1.06 - supply expands.
If the market price of $AMPL during the rebase is below $0.96 - supply contracts.
If the market price of $AMPL during the rebase is between $1.06-$0.96 - supply doesn't alter.
That said, you can get an approximate rebase percentage by looking at $AMPL's price. For instance, say the price per $AMPL is $1.40, the rebase will increase the supply by around 4%. If it's at $1.50, the rebase will increase supply by ~5%, so on and so forth.
Conversely, say the price per $AMPL is $0.90, the rebase will decrease the supply by ~1%. If it's at $0.80, the rebase will decrease the supply by 2%, so on and so forth. You can get detailed data on historical rebases here.
4. $AMPL is where Bitcoin was in late 2010
The Ampleforth protocol was first conceived in February 2018 but the $AMPL token only launched to market in June 2019. Therefore, $AMPL is still a very new cryptocurrency that is wildly misunderstood and underappreciated.
In that sense, Ampleforth is much like how Bitcoin was in late 2010.
Let me explain:
Back in 2010, Bitcoin was a confusing, obscure thing that no one fully understood. They didn’t understand how blockchain technology worked and that every single transaction was recorded and openly available for everyone to see.
People did speculate on its price though. People were getting rich and rekt left and right. They were pointing fingers, yelling “it's a scam!”, “it’s a ponzi!” They had no idea of the revolutionary ramifications Bitcoin has.
Come to think of it, most people still don’t…
But anyways, Ampleforth is in the same position as Bitcoin was back then today. It’s a new type of cryptocurrency that pioneered the Multi-Variable Asset (MVA) digital asset class; it’s the first cryptocurrency with an elastic supply.
Therefore, $AMPL is still wildly misunderstood and people are yet again, making and losing money left and right.
Now, just think about this for a minute.
If you knew what you know now about Bitcoin, its potential, and how it follows market cycles; and if you could travel back in time to late 2010, you would absolutely dominate the Bitcoin market. All you needed to know back then is that Bitcoin follows market cycles as it gets adopted on the macro scale.
Now, apply this same logic to Ampleforth.
Like Bitcoin in 2010, Ampleforth is a new and revolutionary digital asset that follows cycles as it gets adopted on the macro scale. If you can understand $AMPL’s cycles, you can take advantage of them to profit immensely.
But what are its cycles?
Ampleforth appears to be following supply expansion cycles where the supply of $AMPL grows rapidly as its price massively extends over the equilibrium threshold for some time. $AMPL has thus far experienced 2 supply expansion cycles and I think we are entering the third cycle now.
See below, the supply of $AMPL during each cycle and where I think we’re at today:
All I’m saying here is that if you can begin to understand $AMPL, its rebase mechanism and its supply expansion cycles; you can profit from the opportunities it presents.
Also, these expansion cycles ultimately lead to greater $AMPL stability over time as a larger market cap leads to decreased volatility:
Stability Over Time (Imagine the x-axis is a 20-year timeframe)
All that said, $AMPL has a lot of room for growth and adoption as it's still early-stage crypto, similar to how Bitcoin was in late 2010.
5. Price Movements Will Be Rapid in a Short Period of time
$AMPL Price over 1 year (Source)
Remember, $AMPL is not a stablecoin, its price can and does fluctuate rapidly during short periods of time.
For example, take a closer look at the chart below and notice how far above and below the price of $AMPL was from its equilibrium threshold of around $1.00 during the past 60 days:
The $AMPL price went above and below its equilibrium threshold 12 times in each direction reaching as high as +18% and as low -18% in just 60 days.
Therefore, $AMPL’s price movements can be erratic at times, and its currently well over its equilibrium threshold as its trading at $1.37 per $AMPL.
However, this probably won’t last for long because the $AMPL supply is expanding every day that its price is above equilibrium. And the higher the price goes, the larger the increase in $AMPL supply will be.
Inevitably, $AMPL token holders will sell some or all of their $AMPL at this higher price; causing the price to fall back towards equilibrium; and decreasing the number of inflated supply.
If the $AMPL price keeps on dropping, the inflated supply will keep dwindling and will switch to a decreasing supply once/if the $AMPL price drops below equilibrium.
That’s how the system works.
That said, $AMPL is not going to be your regular ERC-20 token that continuously climbs over the years to reach $20.
Rather, it’s a token where you can profit immensely by hopping on the $AMPL train when there’s positive rebasing to compound your holdings and then jump off the train during negative rebase periods OR you can accumulate heavily when it's far below $1. $AMPL is the only crypto you can buy high and sell low and still make a profit.
It’s really that simple and once you fully understand it, you’ll have that epiphany moment and think to yourself “huh…this thing actually is really cool and revolutionary”.
6. $1.02 Target Price Works Like Clockwork
Okay, now it's time to explain the equilibrium price target.
$AMPL aims to be worth exactly $1.024 in 2019 USD value
The CPI price target plays a critical role in the Ampleforth protocol because it is used in conjunction with $AMPL’s current price to determine if there should be a change (rebase) in the total supply of $AMPL.
Therefore, the entire rebasing mechanism is dependent on the CPI price target of $1.024. $AMPL’s supply expands and contracts when it's above and below this value respectively. It does this in an effort to reduce volatility and stabilize around the target price of $1.024.
So, how has Ampleforth’s system faired in its effort to maintain $AMPL around its target price of $1.024? Is it close, or is the system failing?
Well, if you take the closing price for the entire history of $AMPL and plug it into a spreadsheet to get an average, you get an average $AMPL price of $1.027!
That’s pretty crazy, right?!
Ampleforth’s $1.02 price target works like clockwork. That’s a fact, it’s real, it’s huge, and few people realize.
But more importantly, it means that Ampleforth’s protocol with all of its complex dynamics with rebasing and free-market participants effectively setting the price actually works.
$AMPL is simply a revolutionary cryptocurrency that’s still in its infancy and despite its price swings, over the long run, it has managed to hold onto its premise that it will target the $1.024 price target.
7. Low Correlation to Bitcoin
$AMPL may very well be the most uncorrelated cryptocurrency to Bitcoin and any other digital asset due to its unique design of incentives invoked by its daily rebase and elastic supply.
While other cryptos mirror Bitcoin’s major volatility to the upside and downside and follows the overall trend of Bitcoin, $AMPL decouples from Bitcoin's price patterns.
For instance, take a look at the chart below. It’s a heat map showing the correlation of various crypto assets. 1.00 means it mimics the asset, and the closer to 0.00 the lesser the correlation:
Notice how $AMPL has the smallest correlation with any top crypto asset pretty much? That’s because $AMPL’s unique incentives through supply elasticity cause the free market to interact with $AMPL differently.
$AMPL’s low correlation to Bitcoin and other crypto-assets coupled with its relative stability makes it an ideal cryptocurrency to be used to denominate stable contracts. As such, $AMPL is a favorable asset as a financial building block for a variety of DeFi applications.
One such DeFi application taking advantage of $AMPL’s stability and low correlation is Yield Credit – a P2P lending dapp that not only incentivizes lending with interest (as always) but borrowing too.
Yield Credit allows lenders to use $AMPL as a principle (the initial size of a loan/the amount the borrower must repay) due to its low correlation to Bitcoin and overall stability.
That said, I’m sure we’ll see more DeFi dapps using $AMPL to denominate stable contracts and be used in a wide variety of ways in DeFi applications.
Share this piece with anyone who struggles to understand the nature of $AMPL.