6 $AMPL Misconceptions Debunked
It’s time to put together common misconceptions about $AMPL and clarify them once and for all.
1. $AMPL is pegged to the dollar
This is false. $AMPL is not pegged to the dollar. In fact, $AMPL has no peg at all.
This is what really confuses people.
Instead, $AMPL targets the purchasing power of a CPI-adjusted 2019 US Dollar. (more on CPI)
You can find the CPI-adjusted 2019 US Dollar price target on the Ampleforth dashboard: www.ampleforth.org/dashboard which is currently at $1.039.
The price target is not fixed, because the dollar is inflationary, which causes the CPI-adjusted 2019 Dollar price target to shift.
By targeting the CPI-adjusted 2019 Dollar, the idea is that $AMPL can maintain its purchasing power over time. And the only reason they chose the 2019 dollar is simple - $AMPL launched in 2019.
Therefore, unlike the dollar and dollar-pegged stablecoins, although $AMPL has a USD target price, it’s not pegged to it.
2. $AMPL is a stablecoin
No, $AMPL is NOT a stablecoin.
This is probably the most common misconception.
$AMPL is not a stablecoin because its price is not stable. Instead, it fluctuates frequently around the target price of USD 1.00 and can extend far above or beyond that during network growth or contraction periods.
$AMPL on the price chart is not stable and unfamiliar people point fingers calling it a failed project that struggles to maintain its peg.
$AMPL allows volatility by design.
Movements from the price target are the primary mechanism that engages $AMPL’s elastic supply policy; which effectively transforms $AMPL price volatility for supply volatility.
Arbitrators act on free-market incentives by taking advantage of $AMPL’s price and supply fluctuations to turn a profit, and in turn, that effectively stabilizes the $AMPL price.
Therefore, $AMPL is not a stablecoin. Rather, $AMPL is what’s called a Multi-Variable Asset (MVA) — it has two fluctuating variables, Price and Supply.
3. $AMPL under $1 is failing
No, this doesn’t mean $AMPL is failing to maintain a peg.
It has NO PEG.
Remember:
- $AMPL is Not pegged to the dollar
- $AMPL is not a stablecoin
Therefore, if $AMPL is under $1.00, there is no problem. It simply means $AMPL is currently below its target price and can be bought at a discount on the market.
That’s how $AMPL works.
When it’s below the target price, people buy $AMPL at the discounted rate, which brings it back up to the target price.
$AMPL under $1 is a feature, not a bug, not a failure.
For example, when long-term $AMPL fans see its price under $1.00, they don’t panic sell their $AMPL because they think it’s failing, they view it as an opportunity to buy $AMPL at a discount.
In fact, they feel incredibly lucky that they have an opportunity to capture a percentage of the $AMPL network for less than it would cost them if it were $1.00.
And guess what?
It doesn’t matter if the price of $AMPL goes down and the next day they end up with fewer $AMPL tokens because their percentage of the $AMPL network always stays the same.
In this sense, $AMPL is non-dilutive like Bitcoin, and thus more attractive than a stablecoin.
4. Negative Rebases make you lose your tokens
Yes, that’s partly true.
When a negative rebase occurs, the total supply of $AMPL is contracted proportionately across all wallets. This means you’ll end up with lesser $AMPL tokens in your wallet the very next day.
For short-term traders, this can be very painful as the value of their holdings decreases. But for long-term participants, it doesn’t matter as they hold the same % of the $AMPL network regardless of the result of the rebase. That’s all that matters to them.
In a way, it’s really no different than Bitcoin, just different tokenomics.
Bitcoin has a total supply of 21 million and when you buy some, you capture a % of that total supply. It doesn’t matter if the price of $BTC goes up or down, you always hold the same % of the Bitcoin network.
The only difference is that with $AMPL, your balance can also fluctuate up or down. But you’re still accumulating a fixed % of the supply, similar to accumulating Bitcoin but in a different fashion.
Therefore, when you buy $BTC you’re betting that it will be worth more in the future, and when you buy $AMPL you’re betting that its network will be bigger in the future, which means its supply will increase, and thus the number of tokens you hold.
5. $AMPL Expands When >$1.06 and Contracts <$0.96
Sure, when $AMPL first launched and had a solid $1.00 price target this rule was true, but as inflation continues, the CPI-adjusted 2019 dollar value continues to change.
As mentioned, $AMPL targets the purchasing power of a CPI-adjusted 2019 Dollar and this number continues to change as the US Dollar is inflationary.
The $AMPL target price now is $1.039 (7 June 2021) as opposed to $1.00 just 2 years ago. You can see the up-to-date CPI-adjusted 2019 dollar value at ampleforth.org/dashboard.
Since the $AMPL price target (the CPI-adjusted 2019 dollar) changes due to inflation, the $AMPL expansion and contraction threshold are set at 5% rather than the fixed $1.06 and $0.96 price points.
If the Oracle Rate is within a 5% threshold of the Price Target, no rebase will be applied. In other words, if -0.5 ≤ Rebase % ≤ 0.5, the effective Rebase % will be 0.00.
So, based on today’s price target, in order for rebase to trigger supply expansion, the oracle rate needs to exceed ~1.091 at the time of the rebase.
While the negative rebase is triggered at sub ~$0.98
6. $AMPL can be used as money
Just not yet. $AMPL is only 2 years old now… it’s just an infant on a history of money timeline. But in due time, it will grow and mature to become a new monetary standard.
See below, $AMPL use cases for the near term, medium-term, and long term:
In the long term, $AMPL is intended to be a better Bitcoin and alternative to central-bank money that is adaptable to shocks in the economy. But for now, $AMPL is far too small and volatile to be used as money.
However, as it grows to a much larger market cap, the price of $AMPL will become more stable as a larger market cap leads to decreased volatility:
