(Image from Ampleforth)
Ampleforth has probably been one of the ‘hottest’ projects the past few weeks. AMPL grew from a $13,500,000 market cap on June 29th to a whopping market cap of over $700,000,000 on July 27th. Giving massive returns to those who got in ‘early’ and enjoyed daily positive rebases for almost a month in a row. Today I'll be going over the concept, team, investors and some criticism I have. Let’s get started.
What is AMPL?
AMPL is a cryptocurrency like Bitcoin, the major difference is that the AMPL supply is elastic and changes daily. One of the best explanations about the daily rebase I found in this post on Publish0x.
AMPL is non-dilutive meaning that these daily supply changes are applied to every wallet - meaning your ownership % of the supply is fixed. If you own 1% of the supply, then you’ll always own 1% of the supply. Unlike fiat, where the fed prints a whole bunch of money, devaluing the currency, leaving the majority of the holders with decreased purchasing power (inflation).
The supply changes are based on supply and demand, the protocol works so that the price always gets back to an equilibrium. When the price is high, wallet balances automatically increase. When the price is low, wallet balances automatically decrease. This happens once a day at 02:00 UTC and is called a rebase. The rebase is based on the average 24 hour AMPL price.
You can find a timer and oracle rate (last reported 24h average price) in the Ampleforth Dashboard.
The rebase rates are fixed and the Ampleforth protocol has minimum governance involved. This means that no governance exists to make adjustments in the interest rates or supply. AMPL is an ERC-20 token and can therefore be integrated with many DeFi (Decentralized Finance) applications.
(Image from the Ampleforth Whitepaper)
Why is elastic supply interesting?
As the economics section on the Ampleforth website states: ‘’Supply elasticity allows for currencies to adapt to economic shocks. This is good for everyone’’.
I highly recommend you to read this page on elasticity: https://www.ampleforth.org/economics/. As it offers a perfect example.
Now, I sometimes see random charts popping up where people try to apply technical analysis on AMPL to try and make money. It’s important to mention that gains and losses in the Ampleforth Network are based upon the supply and not just the price. Because of the supply changes, it makes no ‘sense’ in a way to apply TA and think AMPL might go to for example $15 a piece. As when supply increases usually there’s more supply - eventually bringing the price back to around $1 ($0,96 - 1,06 = 0% supply change = equilibrium).
It does however make sense to ‘trade’ or hold AMPL based on the total market cap. In one of my previous Quora posts I mentioned I could see AMPL in the top 20 market cap. This means the market cap would be around $1,100,000,000 USD. Currently the market cap is about $318,000,000.
Keeping this in mind and knowing this means the supply will need to increase - considering the supply will need to increase for this, this means I believe the price of AMPL will exceed $1 at least for a while to provide these returns. Based on this thought, I have purchased AMPL almost any time below $1 (the lowest entry being $0.67 the past week).
(Image from Coingecko)
I am aware we might see negative rebases for a few days, maybe even longer - meaning the market cap will decrease and I might see temporary losses. However, as my percentage of the market cap is fixed, this is no problem to me - as eventually I believe positive rebases will give me the returns I’m looking for.
I have applied this together with some day trading (I sold AMPL multiple times when we were well above $1, with the thought we’ll be swinging between $0,8-1,4 for a while), and bought back below $1. By doing so, I combine day trading with the daily rebase. I would however consider this to be more ‘advanced’ and not suitable for those who make emotional decisions when trading.
I’m a big believer of the Ampleforth Protocol. AMPL therefore is the second largest holding in my portfolio. However, I do still have certain doubts about the team’s moves.
- 8 days ago, on July 26th, Ampleforth moved 6,477,525.21 AMPL out of the ecosystem fund to another wallet. These funds were shortly thereafter moved to two different wallets (wallet 1) (wallet 2). Funds sent to wallet 1 were all moved to KuCoin. Funds sent to wallet 2 were all moved to Bitfinex.
I started to ask questions about this on their official Discord. Unfortunately, no team member has replied to me - and the ‘volunteering admin’ mentioned it’s not a good place to ask such ‘speculative questions’, ‘ask them during the upcoming AMA, date is unknown’.
Ampleforth’s transparency report states : ‘’The ecosystem fund will be used to invest in other projects, encourage the developer community, create bounty programs, drive marketing and develop business partnerships’’.
Considering AMPL’s market cap dropped from an all-time high of $700M+ USD to $300M within three days tells me these funds were all dumped on the exchanges and whales/investors followed. So my question (based on assumptions) is: The team notices the market was dropping, why did they continue transactions to exchanges to dump more? Why did the team not come with a statement as to why suddenly 6M AMPL was moved instead of the usual 100-200k AMPL - and what will these funds be used for? I’m aware it wasn’t just the team’s tokens that could’ve caused the full dump, but I do strongly believe it heavily impacted the community sentiment, as this question has been asked many times the past week.
- To continue, 7 days ago 10M+ AMPL was released from the investor pool to investors. This means that within a timeframe of two days, 16M AMPL was released into circulating supply. Meaning it is very likely that both early investors and the team dumped these tokens on the exchanges during these days, causing the heavily impacted price and market cap.
So, my question (again, based on assumptions) is: Why did the team decide to move and dump 6M tokens a day before this amount was released from the investors pool, knowing that the chances were high a large number of these investors would dump their tokens on exchanges as well? This has definitely impacted my confidence in the team’s decision making.
- During the past six months, 9 transactions were made from the Employee & Advisory pool, counting a total of 905.381,9 AMPL. However, 7 days ago (the same time the investors received their funds) 6.97M AMPL was released from the Employee & Advisory pool in two transactions. This means that within two days a total of 23M AMPL was released into circulating supply. All together, this was an incredible amount to be released within two days, which definitely doesn’t look good. I’ve asked how this transaction was much higher than previous transactions, seems like (and it makes sense) these also enjoyed the x35+ positive rebase of June.
I’m still hoping to receive answers from the Ampleforth team on some of my assumptions. I'm sure I’m not the only one out there looking for answers, as soon as I get answers I’ll see to update this Quora post. Again, my doubts are mainly based on assumptions. However, I do think they are important for the community to receive an answer on. I give the team the benefits of the doubts, but in case these funds were sold by the team, I’d love to hear what these will be used for to benefit the token holders.
A positive look at it could be: AMPL has seen 15 new exchange listings on the two days the price tanked according to this statistics page. And 9 more listings were added in the days after that. So, could these funds have been used used to pay for new exchange listings? As the current exchange listings can nowhere be the value of what’s cashed out, it could be assumed the team uses part of the remaining funds for the by the community anticipated Coinbase & Binance listing. One of the community members mentioned that that’s why they maybe don’t comment on it (NDA). Although, in my opinion it would be good to address it regardless without providing details.
What do I think about Ampleforth?
I believe in the protocol and project, both are simply amazing. Ampleforth has a strong team and creditable investors. My main (and almost sole) concerns are the above mentioned points. Another concern is that the Ampleforth community seems to need education. Lots of people have bought AMPL thinking they’ll receive free money on a daily basis, and leave toxic comments during the days AMPL tanks, this is overall toxic for the community and it’s clear from many comments the protocol isn’t understood correctly. I hope this post can be part of the solution, by explaining the basics of Ampleforth.
Overall I think AMPL is great. However, I've kicked it out of my portfolio until either things are cleared up around this, or if the price heads above $1 and stays there for a few days.
My original post can be found on Quora.
This post is for informative purposes only, I’m not a financial advisor and I currently do not have a position in AMPL. I am not planning to change this position within the next 48 hours. I have not been paid for this post, this post is out of personal interest.