Yesterday, I wrote a post on how AMPL can mimic $DOGE price patterns (to a degree). This is part two from that post, as I would like to explore how we can predict the next price movement for AMPL a little further.
Predicting price movements is not an easy task for a cryptocurrency like Ampleforth. The cryptocurrency is not like most coins you might have come across previously, such as BTC, ETH, ADA, LINK, etc.
The reason for this is the fact that these traditional cryptocurrencies are what are known as Single Variable Assets (SVA). There is just one variable that can move when determining the value of these cryptocurrencies - the price.
On the other hand, Ampleforth is what is known as Multiple Variable Assets (MVA). This means that there two variables that are free to move to determine the value of AMPL - the price and the supply.
The project’s mechanism is designed to keep the price as close as possible to the CPI-adjusted 2019 $1 - currently around $1.02 today. To achieve this, it implements what is known as a rebasing feature.
If the price is above $1.06, the protocol will increase the supply of AMPL on the market (and the supply of AMPL tokens in your own wallet). This is to incentivize holders to sell and bring the price near the $1 target.
Alternatively, if the price is beneath $0.96, the protocol will reduce the market’s supply to incentivize holders to buy more and bring the price back toward the CPI-adjusted 2019 US Dollar.
To find out more detail about the new type of asset class (MVA) that AMPL introduced to the world, take a look at this piece I wrote earlier in July 2020.
So, What Can We Do To Predict The Next Movement?
If you are willing to enter a substantial trading position into $AMPL then, of course, you should look at the asset’s price before buying. However, the main chart you should be putting your attention toward is the supply chart for AMPL.
Ampleforth Total Token Supply Chart. Source; Ampleforth Dashboard
You see, even if the price of $AMPL seems to be going nowhere and moves sideways for one month straight - that does not mean that traders aren’t turning any profit.
This is the secret behind AMPL, and it seems that many are still yet to grasp the situation about what is going on entirely.
While the price of AMPL moves sideways, providing it is above the $1.09 level, holders are still experiencing a positive rebase period behind the curtains. This means that holders are profiting from holding AMPL, without regular traders knowing about it.
Typically, regular traders are looking for solid price action. So when an asset moves sideways for an extended period of time, they are more likely to sell to redeploy their capital elsewhere. Meanwhile, the AMPL holders that understand the economics behind the project are quietly increasing the total value of their holdings through the increased AMPL supply they receive.
A great example of this is during November 2020;
The chart above shows the period between October and December 2020. From mid-October through the end of November, the chart shows that AMPL was pretty much range-bound between $1.35 and $0.90 for the entire period. It did breakout higher toward the end of December, but that is irrelevant to the point I am making here.
In this situation, regular traders would have probably pulled their holdings and looked elsewhere for coins that are making consistent “higher highs.”
But, let me show you what was really going on behind the curtain;
The graph above shows the reabse percentage that holders were earning during this period. On average, holders throughout November were making a total of 1.3% increases in their AMPL supply daily.
That is compounded. Daily.
If you know the magic of compound interest, you will instantly understand the impact that this can have on your holdings.
This is what happened to the total supply of AMPL during that time;
It shows that the total supply of AMPL increased from beneath 200 million at the start of the month to reach as high as 322 million by December.
Remember, the supply increases proportionally. So the excess supply was going directly into holders wallets - daily!
So, how can you use the supply to predict the next AMP movement?
Suppose you notice that the AMPL supply chart starts to move a lot higher over an extended period of time without any heavy price movements lower before that. In that case, you can anticipate selling pressure on the horizon.
On the other side, if you see that the supply of AMPL has been dropping quite significantly over a period of a few weeks, and the price for AMPL still remains under $0.96, you can anticipate that there will be some big buys incoming to bring the price higher above $1.00.
Outside of the market’s supply side, there are some fundamental factors that you can bring your attention toward.
Following are two examples of fundamental shocks that might impact the price of AMPL;
The Next Pump?
The next fundamentally driven pump for AMPL can come directly from an exchange listing. Remember, Brian Armstrong, CEO of Coinbase, is personal friends with the founders of AMPL and has already invested in the project himself. This is a strong link to get AMPL listed on Coinbase eventually.
On top of this, it seems that Binance has also started to take a keen interest in AMPL. For starters, they released an in-depth explanation article on elastic supply tokens a few weeks ago. You can find that here.
Then, people noticed that Binance had created a page on their exchange for the AMPL/BTC pairing.
Although it has disappeared now, the URL was at; https://www.binance.com/en/trade/AMPL_BTC.
You probably won’t believe me if I told you that I personally managed to see this page with my own eyes.
However, a quick search on Wayback Machine, a website that takes snapshots of websites during specific times, also managed to take a snapshot of the page. This proves that it existed and that Binance have it on the table;
The Next Dump?
A fundamental factor to consider for the next potential dump could potentially occur when the next round of incentive mining ends.
Ampleforth has an incentive program, called the Geyser, to improve the depth of liquidity across AMPL decentralized markets. These run for a set period, and users typically hold their liquidity in the program until the end due to the increased multiplier they receive.
When the current Geyser ends, it might take time before a new one gets announced. In that time window, however, we can expect strong selling pressure of those who kept AMPL for nearly 3 months.
The next Geyser will end in around 48 days. It is something you should keep your eye on.