Bitcoin

The offer of this cryptocurrency increases with the price

Ampleforth (AMPL) is a cryptocurrency that was created with an elastic offer which expands and contracts depending on demand. According to its co-founder Evan KuoThe team tried to learn from the mistakes of the gold standard and Bitcoin (BTC) Creation of a more flexible monetary system.

Investors collect bitcoin and gold

Although many in the crypto space see the finite inelastic supply of Bitcoin and gold as a big advantage over fiat money, Kuo disagrees:

“The only problem with gold arises when you use it as base money or as a basic component as part of a financial infrastructure.”

Accepted Kuo perceives Bitcoin as digital goldthe same problems apply. The price rises with increasing demand and apart from that The population expects future price increases and they start hoarding the asset. This leads to a deflation spiral. Ampleforth is equipped with an elastic and automatically adjustable supply. Once a day, The offer is automatically expanded or reduced based on the activity level in the last 24 hours.

Create an asset that doesn’t correlate with Bitcoin and traditional assets

The offer of this cryptocurrency increases with the price
The offer of this cryptocurrency increases with the price

The overall range also adapts, although the proportional participation of each owner does not vary. The equilibrium target is set at one dollar, adjusted to the 2019 consumer price index. Kuo admitted that AMPL is unlikely to become a stable currency in the near future:

“It is therefore true that we have this target, and it is also true that it will be much more stable in the long term. But it is by no means a short-term goal or a measure of success. “

According to Kuo One of the main goals of this design was to create an asset that was not correlated with traditional assets and Bitcoin. Although Bitcoin and other crypto assets have had little correlation with traditional assets in the past, every major crypto has followed Bitcoin’s path. This poses a challenge for cryptocurrency investors as diversification with highly correlated assets is impossible.

Correlation between Bitcoin and other top cryptocurrencies

Correlation between Bitcoin and other major cryptocurrencies. Source: coin metrics.

We calculate a simple Pearson correlation between Bitcoin and AMPL prices and it is 0.1, which is very weak.

Potential for compound price movements

An interesting result of Ampleforth’s design is that An investor has to value his investments differently. AMPL has the potential to accumulate profits and losses.

For example, suppose an investor owns 10 AMPLs that he bought for $ 1 each, so his wallet is worth $ 10. The price then increases by 10% to USD 1.10 while the offer is expanded by 10% and the investor’s funds are increased to 11 AMPL. The value of the investor’s participation increases to USD 12.10.

One possible strategy would be to do the daily adjustment by analyzing the data and anticipating the direction of the next change.. Kuo admitted that this could be a viable strategy, but it’s not without limitation:

“It should also be remembered that everyone else has the data too, so it’s a game theory. And yes, this strategy is certainly good. I mean it’s an interesting strategy. […] But it is not without risks since you are placing a bet. “

Kuo believes that AMPL (as he calls it “oracalized money”) can offer the DeFi room new possibilities due to its unique properties. These options need not be limited to Ethereum (ETH) only. According to Kuo From the beginning, the team viewed AMPL as a “multi-chain” system.

Update: This article was updated on July 30 to take into account that AMPL’s offer increases with price.

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