$AMPL Rebase is Something Your Yield Platform Doesn’t Want You To Know About
DeFi is great.
It’s an open and global financial system that gives you control and visibility over your money blah blah blah…
But let’s be real here…
HIgh APYs offered by DeFi platforms pull in capital from across the world to those fertile lands.
Double, triple, quatriple-digit APY even.
These types of returns just aren’t available in TradFi but they’re everywhere in DeFi.
That said, the hunt for the greatest APY is ON.
(We are in it for the tech too)
There is one thing your yield platform doesn’t want you to know… and that’s $AMPL rebase mechanism.
Take a sit, grab a coffee.
Short intro into $AMPL Rebase
First, a few words for those who are not getting $AMPL rebase fully yet.
Ampleforth’s elastic supply cryptocurrency, $AMPL is the first rebasing currency to ever exist.
An $AMPL rebase is when the supply of $AMPL is automatically and proportionally adjusted across all wallets (Yes, on DEXs and CEXs and your metamask wallet) in response to demand, and it occurs every day at 02:00 UTC.
In other words, the number of $AMPL you own can change each day, but your percentage of the $AMPL network always stays the same because $AMPL is non-dilutive, like Bitcoin.
Here’s how it works:
The Ampleforth protocol targets a price of around $1.03 (the 2019 inflation-adjusted US Dollar) and has an expansion threshold at ~$1.09 and a contraction threshold at ~$0.98 (at the current Price Target).
If the price of $AMPL is above its expansion threshold at the time of the rebase, the supply increases. If the price is below its contraction threshold at the time of the rebase, the supply decreases.
In simple terms, $AMPL trades price volatility, that you typically see with $BTC $ETH $LINK or virtually any asset, for supply volatility.
You see, arbitrators take advantage of the newly increased or decreased supply by selling or buying $AMPL, which then brings the price of $AMPL back to its equilibrium price of around $1.03.
Now that you know what an $AMPL rebase is, it’s time to learn how to profit from it to make your yield platform jealous.
Live Example: High APY vs $AMPL Rebase
Let’s compare investing in $AMPL vs a yield platform offering a 50% APY.
Say you have $1000.
1)You to put it to work in one of these hot yield platforms like YFI or Harvest Finance.
2) You can put that money into $AMPL or into the yield platform offering a 50% APY.
Which one will give you a better return?
Let’s find out:
1)$1000 in a Yield Platform offering a 50% APY
If the yield platform’s APY holds precisely at 50% for the entire year, you will end up with $1500 the next year. This is still a fantastic return considering that your average bank account offers an APY of 0.04%.
2) $1000 in $AMPL
If instead, you put that same $1000 in $AMPL, you could achieve a similar return in under a month.
That’s right, under a month! Not a year.
In the image above, you can see $AMPL’s most recent rebases from April 15 to May 11, 2021.
Say you bought 1000 $AMPL for $1000 on April 14th and you held it for just 27 days to today, May 11th.
How much would it be worth?
Your $1000 invested in $AMPL would now be worth $1670.81 after just 27 days!
That’s the stuff that makes your yield platform jealous.
And get this, all you had to do was buy $AMPL and hold it in your personal wallet.
There’s no need to spend exuberant amounts in gas fees depositing and withdrawing funds to and from a yield platform.
There’s no need to do anything. Just hold and profit…no?
Agreed, that’s an optimistic scenario where $AMPL experiences a series of positive rebases.
It can be a double-edged sword for those who are looking for short-term profits. A series of negative rebases can get you rekt (again, if you are looking for a quick buck) if you time it wrong.
Should I Be Afraid of Negative Rebase?
The short answer is no.
Let me explain:
If you’re a critical thinker, you might be thinking right now:
“Sure, positive $AMPL rebases can net me high returns in short amounts of time, but what if the rebases go negative? If that happens, the value of the USD that I put into $AMPL could decrease quite significantly…”
You should not be afraid of negative rebases if you are in it in the long run.
Here’s a scenario:
If you put money into $AMPL and over the next days, weeks, or even months, the price of $AMPL goes below its contraction threshold of $0.96 and experiences multiple negative rebases, not only is your $AMPL worth less, but you have fewer Amples than what you started with.
Now, that’s pretty scary, right?
What you need to remember is that your percentage of the $AMPL network always remains the same. When a rebase occurs, the supply adjustments are applied universally and proportionally across every wallet’s balance.
So if you hold 2% of the network today, you’ll also have 2% even after a neck-breaking series of negative rebase periods.
Therefore, all you need to do is wait for the market cap to return to where it was when you bought in, to be back on track with the same amount of $AMPL you had when you started. And by that time, you’ll probably get to enjoy an $AMPL price above $1 and the positive rebases that come with it.
So, to sum it all up:
If you have a long-term conviction for $AMPL (like that famous $BTC or $ETH holders) then you have nothing to worry about.
I promise you that positive rebases reward holders very well so that it makes not only your farming platform but also your girlfriend jealous.