A couple of weeks ago, I dropped a post stating that $AMPL was ready for another rebound. Two weeks later, the cryptocurrency has surged back above $1.06 and has entered back into positive rebasing territory again.
This brings up an interesting proposition to all $AMPL holders as it starts to bring about the makings of its 3rd supply expansion cycle.
As you may know, Ampleforth is a supply-elastic cryptocurrency. This means that the supply expands or shrinks depending on where the price is in relation to the targeted peg ($1.02).
The first expansion cycle occurred in the very early days of $AMPL during February 2020. There, the supply increased from a low of around 8 million $AMPL to reach as high as 20 million $AMPL by May 2020. At that time, the price shot above the $1.06 threshold (for positive rebases) and surged as high as $1.50.
The second expansion cycle started toward the end of June 2020. In this cycle, the supply for the cryptocurrency started at around 20 million $AMPL and shot up to reach as high as 780 million $AMPL. This was largely helped by the fact that the price managed to reach as high as $3.75 at its peak during that time.
The 3rd expansion cycle is just about to get started.
The following chart breaks down the supply for $AMPL during each expansion cycle;
Additionally, I’ve included a price chart to help you visualize how price action affects the rebases and the expansion cycles;
After the huge $AMPL supply increase in mid-2020, there was a period of correction. It settled down around the 180 million $AMPL supply level after falling for a period of two months. There was a brief supply increase during November 2020, allowing the supply to rise back above 600 million $AMPL, and now, after a brief phase of consolidation, it looks like it might be ready to enter a new phase of rapid expansion.
Only, this expansion phase will be slightly different.
This is due to the fact that the Ampleforth team is consistently broadening their horizons. For example, $AMPL is set to launch on three new blockchains in Q1 2020, including NEAR protocol, Polkadot, and Tron.
On top of that, there are other protocols that are using the Ampleforth code and integrating $AMPL into their own systems. For example, Yield Credit, a lending platform that incentivizes borrowers, has plans to have $AMPL as one of their main sources of collateral.
With the overarching ecosystem behind $AMPL continuing to bubble, this expansion cycle might blow everybody away.
How Can We Measure How High The Supply Will Go?
When it comes to cycles, people like to look at the ones like Stock-to-flow model - particularly in Bitcoin. It measures the current stock (whatever is available on the market) against the flow of the stock (newly mined coins).
However, for an elastic supply currency like $AMPL, the stock-to-flow model is not applicable. This is because the stock actually receives flow inside expansion cycles. This is because the rebase of $AMPL is automatically adjusted inside everybody’s wallets.
In short, As long as the price remains above the $1.06 target price, we can expect positive rebases to occur within the market. Below $0.96 - it shrinks. In between, it doesn't contract nor expand.
Remember, $AMPL is not the type of cryptocurrency we should expect to slowly climb to new price heights. They will be rapid - huge swings up lasting for a short period of time.
But, how can we know that such a swing is coming?
Take a look at the $AMPL supply chart
After its massive expansion mid-2020 it saw a rapid collapse due to the selloff but since then $AMPL's supply settled at around $350M levels. Given the ongoing bull run, I don't anticipate supply contraction in the upcoming weeks.
PS. You can even buy high and sell low and still make money in this coin!
With that said, let us take a quick look at the price charts;
In my last analysis, I had highlighted the support $0.781. It seemed that support held and allowed $AMPL to rebound higher and start consolidating inside a symmetrical triangle pattern. This symmetrical triangle pattern finally broke at the start of February as $AMPL managed to surge right into the resistance at $1.51 (bearish .786 Fib - also highlighted previously).
On the 2nd of Feb, $AMPL spiked higher to reach $1.61 (bearish .886 Fib) but came down lower from there. It went on to drop into the support at $1.35, provided by a .382 Fib Retracement, and is doing its best to remain above there today.
The use of these Fib Retracements proves that technical analysis still works in this asset class. Do not be fooled by the noise you see about people claiming TA does not work here. What does not work here is the typical trading strategies that traders use - based on TA. These trading strategies need to be tweaked to keep supply adjustments in mind.
Nevertheless, if $AMPL can remain above $1.06, the positive rebases will continue to increase the supply.
If $AMPL does drop beneath $1.35, support lies at;
- $1.27 (.5 Fib)
- $1.19 (.618 Fib)
- $1.06 (rebase thershold
- $1.01 (.886 Fib)
On the other side, if $AMPL continues to rise, we can expect resistance at;
- $1.51 (bearish .786 Fib)
- $1.61 (bearish .886 Fib)
- $1.70 (long term bearish .5 Fib)
- $1.77 (1.414 Fib Extension)
- $1.90 (1.618 Fib Extension)
- $1.97 (long term bearish .618 Fib).
Beyond that, $2.20, $2.36, and $2.60 will provide additional resistance - if it ever gets that high again.
Let me repeat.
Do not get too carried away with the price in this market. Instead, look at the supply levels. If this 3rd expansion cycle does continue further, you will be receiving additional $AMPLs into your wallet.