AMPL Negative Rebase is No Longer a Worry if You Realize This One Thing
Upon discovering Ampleforth and its elastic supply Ample token, I observed various $AMPL channels and blogs in an effort to grasp the concept of its novel tokenomics and rebasing functionality.
Throughout this research, the main concern that people stressed about (me included) was the negative rebases for $AMPL. People couldn’t wrap their heads around the fact that if they buy $AMPL and a negative rebase occurs, they could have fewer Amples valued at a lower price the next day.
Back in the days I also had the same concerns about negative rebases. It’s like getting rekt on steroids, isn’t it?
In this article, I’ll offer pain relief for those who (or want to) bet on $AMPL.
I’m going to help you realize this one thing that’ll make you no longer worry about $AMPL’s negative rebase.
Let’s get to it.
You read about how $AMPL is the future of France, I mean finance. That it will evolve to be a fair and politically independent commodity-money that can be used as an alternative to central-bank-money, rather than a digital-silver or digital-gold….blah blah…
This piques your interest and you decide to buy some, say 100 $AMPL tokens for $100 (for simple math), and without getting the rebase mechanism yet, you wake up the next day with 98.5 $AMPLs valued at around $87 and you wonder what happened.
Not only did the price drop, but also the amount of Amples in your wallet.
Confused and concerned, you check Ampleforth’s Telegram or Discord to see what happened and mods prompt you with a message stating that this is how $AMPL works and guides you to the details of the rebase mechanism.
Here’s Where 95% of the People Give Up on AMPL
People get discouraged when they buy $AMPL and there is a chance that the next day, not only is it worth less but they own less of it too.
I mean, how could you not get discouraged by that?
Which begs the question:
Why would you hold $AMPL during negative rebases and who’s buying $AMPL sub $1.00 just to expose themselves to a high chance of losing a chunk of it the very next day?
Why would you buy into this insanity?
Here’s the thing… These few people that are in it for the long term don’t worry about the $AMPL price or negative rebases as they are basically capturing a % of the $AMPL network. That’s all that matters to them.
It doesn’t matter if the price of $AMPL falls below their purchase price or if they have fewer $AMPL after a negative rebase because their percentage of the $AMPL network always stays the same.
Therefore, these people are simply betting on the supply growth of $AMPL.
Still not getting it? Let me explain further:
People are familiar with tokens appreciating/decreasing in value. This is how any asset with a price tag has been for decades. But pretty much no one is used to having the amount of the asset they hold decrease.
It’s almost unfathomable to think of.
So the moment they see it happening, they run away, screaming it’s a SCAM to anyone they meet along the way.
However, if you understand that when you buy $AMPL you’re actually capturing a % of the $AMPL network, seeing your supply decrease due to a negative rebase suddenly becomes fathomable.
You see, the few people who get $AMPL know that when a rebase occurs, the supply adjustments are applied universally and proportionally across every wallet’s balance. Their percent ownership of the network always remains fixed, even though their $AMPL balance changes frequently.
Therefore, the few people who understand this are keen to actually see through the short-term pain and are the ones who can capitalize on $AMPL supply expansions.
On a side note, the confusion surrounding $AMPL is a lot like the confusion surrounding $BTC in 2008. Back then, few understood it, people called it a scam, and only the people who believed in it were the ones to capitalize on its success.
Even to this day, 14 years later, and more than half of the population still believes USD is the best money in the world.
Why the Negative Rebase is Not as Bad as it Looks
Sure, it’s not a good feeling when you see both the $AMPL price and your wallet’s balance decrease. Nobody likes that. Especially for people who hop between shiny objects during bull runs hoping for a quick pump, you get double rekt in the short term and it feels bad.
However, below I’ll explain why negative rebases are NOT BAD if you are in it for the LONG TERM.
Now pay attention.
Let’s say you buy 1000 $AMPL today for $1000. That’s around 0.00045% of the total $AMPL network at a $222M market cap. Now, let’s say that for some reason, $AMPL’s market price stays below $0.90 for 3 months straight. Yes, 3 months…sounds like horror doesn’t it?
Do you know what that means?
It means 3 months of negative rebases.
But don’t get scared off just yet.
If you look closely, you’ll realize that since $AMPL transforms price changes into supply changes, you’ll finally sense that it’s a similar experience to if you bought an asset with just 1 moving axis — the price.
Like if you bought $LINK and it went down from $35 to say $25, it hurts to see but you are used to that because crypto is volatile. What you’re not used to is losing the number of $LINK you bought. But once the $LINK that you’re betting on gets back up to $35 and even continues higher, you’re sitting quite happy.
Alternatively, with $AMPL, once the supply that you are betting on gets back to a $222M market cap that you bought in at, you’ll not only be back on track with the same amount of $AMPL you entered the party with, but you’ll probably get to enjoy an $AMPL price above $1 at that time.
And more often than not, that’s exactly what happens. Just look at $AMPL’s 1-year price history:
Every time the price of $AMPL has a negative rebase for a period of time (when it’s below ~$1.00) and climbs back to equilibrium around ~$1.00, the price often continues to climb even higher above $1.00 and enters a positive rebase period.
During which time, you benefit from an increasing $AMPL price as well as an increasing $AMPL supply. It’s a double win.
Hope that clarified some doubts about negative rebases as it’s basically the same as what other assets experience on their $price$ axis, only with $AMPL it’s on the supply axis. That said, if you take just one thing away from this article let it be this:
A negative rebase does not decrease your % share of the total $AMPL network.
When an $AMPL rebase occurs, supply adjustments are applied universally and proportionally across every wallet’s balance. Your percent ownership of the network always remains fixed, even though your $AMPL balance can change frequently.