$AMPL on Aave — Remember Remember the Month of November

In my previous $AMPL on Aave fee and revenue updates (links below), $AMPL was positively rebasing and maintained a near 100% utilization rate on Aave:

  1. $AMPL on Aave Fees & Revenue — The Story So Far
  2. $AMPL is a Revenue-Generating Powerhouse
  3. $AMPL on AAVE = Perpetual Growth for $AMPL Utility & AAVE Revenue
  4. $AMPL will Become the #1 Asset Across Lending Platforms

In this update, however, I provide a complete overview of how $AMPL on Aave has performed throughout the whole of November — complete with $AMPL’s cyclical nature of going through positive, neutral, and negative rebases.

There’s a lot to cover here and it’s all very important. So get comfortable, grab a drink, and let’s get to it.

In the 21 days since my last update on November 9, 2021, the price of $AMPL went from $1.50 to a low of $0.77, and then recovered to $1.30 and is now trending even higher.

As such, $AMPL experienced a 12 day negative rebase period and has now ended the month with the last 5 days in positive territory:

$AMPL Rebase History — Coin Tools

So, how has $AMPL’s price action along with its 12-day negative rebase period affect the lending and borrowing dynamics as well as the fee revenue generated for $AMPL on Aave?

The Short Answer:

$AMPL’s utilization and the revenue it generated declined significantly during this 12-day period.

  • Utilization went from 100% to 80% to 20% to 10% to 5% — declining with each day $AMPL’s price was below target and negatively rebasing.
  • $AMPL went from being the biggest revenue-generating asset on Aave v2 each day for seven days in a row with a peak of $530K (28.7% of total) revenue generated on Nov 9; to becoming an insignificant asset with a minuscule low of $17 (0.010% of total) revenue generated on Nov 19.

Okay. That doesn’t sound great. But…

Despite this lull in utilization and revenue generated, $AMPL still managed to keep its position as one of the major revenue streams on Aave v2 over the past 30 days with $6.0M (19.44% of total) revenue generated to make it the 2nd largest generator of revenue on Aave!

Cumulative Aave Fee Revenue (Nov 1 — Nov 30) Source: Token Terminal

And a similar trend can be seen on the longer timeframes as well. So, currently, it seems that $AMPL really only needs a small amount of time in the sun to be extremely profitable — even with low liquidity.

Now, let’s dive deeper and examine in greater detail how the cyclical nature of $AMPL affects the $AMPL on Aave pool’s liquidity, utilization rate, and generated revenue.

Nov 1st — Nov 11th: $AMPL’s Positive Rebase Period

$AMPL Price & Supply (Nov 1 — Nov 30): Ampleforth Dashboard

When $AMPL is positively rebasing there are strong incentives for both lenders and borrowers which increases liquidity, which results in high utilization, which brings in massive revenue for the Aave protocol and aAMPL pool participants.

For instance:

Borrowers are incentivized to borrow $AMPL to gain exposure to the positive rebase which can lead to APYs in the millions, billions, and even trillions of percent. And they get to keep all the gains earned from positive rebasing as they only have to repay their initial amount borrowed + interest.

This is why $AMPL on Aave maintains a 100% utilization rate for the entirety of positive rebase periods, and is also how $AMPL can generate such large amounts of revenue with so little liquidity and in such little time (compared to $USDC & other Stables).

Lenders are incentivized to lend $AMPL due to the high APYs they receive (up to180,000%) when utilization is high. No other asset on Aave provides APYs this high for lending. Period. And sure, these lenders are missing out on the positive rebase themselves, but think of it this way:

As a profit-focused DeFi yield farmer seeking yield on your capital, would you rather hold $USDC and earn 5% APY for lending it out? Or would you rather hold $AMPL and earn 180,000% APY lending it out?

The answer’s obvious… you’d choose $AMPL right?

It’s these types of people who don’t mind missing out on the positive rebase $AMPL has to offer because they don’t care about growing their $AMPL stack and capturing greater percentages of the $AMPL network. They only care about yield farming high APYs and $AMPL provides that for them.

Note — In addition to the incentives described here, there are other incentives to lend and borrow $AMPL regardless of whether it’s positively rebasing. Read more on these here.

Note — In addition to yield farmers, Aave is quickly becoming a large $AMPL lender with protocol-owned liquidity which is captured from 10% of all fees generated from $AMPL on Aave. As of Nov 30, 2021, Aave holds 505,543.65 AMPL which is permanently used to provide the Aave aAMPL pool with liquidity.

Nov 12th — 13th: $AMPL’s Neutral Rebase Period

$AMPL Price & Supply (Nov 1 — Nov 30): Ampleforth Dashboard

After 23 days of consecutive positive rebases, $AMPL got its first pullback since the start of the positive rebase cycle — which naturally reflected on the revenue that $AMPL generates, its utilization rate, and liquidity provided.

Stats for the 12th of November:

Aave Fee Revenue on Nov 12 — Source: Token Terminal

On the 12th of November, the $AMPL utilization rate stood around 80% and there was $11.8M worth of $AMPL on Aave v2 which generated $4,100 (0.3% of total) revenue generated.

As for the 13th of November, the stats were similar but with even less utilization (~23%) and less revenue generated ($1,100, 0.09% of total revenue generated).

What can we conclude from this?

With the lack of positive rebases, we experienced $AMPL behaving more like a stablecoin with low liquidity on Aave. And since the liquidity was only around $11M, $AMPL couldn’t generate the same amount of revenue that the giant stable coins like $USDC and $USDT can.

Unfortunately, $AMPL did not stay in the neutral zone for long so we cannot deduce a whole lot from this period.

Nov 14th — Nov 25th: $AMPL’s Negative Rebase Period

$AMPL Price & Supply (Nov 1 — Nov 30): Ampleforth Dashboard

On November 14, $AMPL experienced its first negative rebase in 32 days. It was an interesting time as we got to see how it affected the utilization of the Aave aAMPL pool.

Upon entering the negative rebase zone, the majority of borrowers repaid their debt as utilization remained below 23% from the previous day in the neutral zone.

It makes sense that borrowers would repay their debts down here as some may have sold their borrowed $AMPL near the top and were waiting to buy back lower (in neutral/negative territory) before repaying their debt.

As for the revenue side of things, $AMPL’s generated revenue dropped dramatically in the days that followed. After 4 consecutive days of negative rebases, it was clear that many borrowers were not willing to take on the risk associated with the negative rebases which can be seen in the low utilization rate of the aAMPL pool remaining between 5% — 10%.

With this low utilization rate, lenders received only a small shield from the negative rebases and the aAMPL pool’s revenue dropped to just $17 (0.010% of total) revenue on November 17:

Aave Fee Revenue on Nov 17 — Source: Token Terminal

Low utilization rates and little generated revenue remained true for the aAMPL pool throughout the negative rebase period, that is until the final two days.

On November 24, the aAMPL pool actually saw a day of 100% utilization while $AMPL was negatively rebasing! And what’s interesting about this day is that $AMPL was trading at its range lows of $0.79.

And just like that, this leads to an impressive rise to 3rd place on Aave v2 daily revenue generation! And it accomplished this with just $9M worth of $AMPL on Aave v2 which generated $132,100 (11.0% of total) revenue.

And it didn’t stop there.

The next day ($AMPL’s final day of negative rebasing), the aAMPL pool’s utilization remained at 100% and generated over $276K (20% of total) revenue:

Aave Fee Revenue on Nov 25 — Source: Token Terminal

What did these final two days of 100% utilization while $AMPL was negatively rebasing tell us?

That $AMPL is able to quickly bounce back and become a leading revenue generator for Aave once again (with very little liquidity). Also, it showed us that $AMPL was about to make a strong recovery back into positive rebase territory.

Nov 26th — Nov 30th: $AMPL Back in Positive Rebase Territory

$AMPL Price & Supply (Nov 1 — Nov 30): Ampleforth Dashboard

Like clockwork, as $AMPL entered the positive rebase zone on November 26th, it edged its way closer to the top spot on Aave v2.

With just $11.0M worth of $AMPL, the aAMPL pool generated $326,200 (23.4% of total) revenue on Aave. $USDC managed to beat it with ~$20k more in revenue but then again, $AMPL has a vastly lower amount of liquidity:

Aave Fee Revenue on Nov 26 — Source: Token Terminal

As $AMPL closed out the month of November, utilization of the Aave aAMPL pool was hovering between 85% and 90%, which might signal that participants are adapting to the smaller positive rebases that we are currently seeing as $AMPL begins to climb higher in the positive rebase zone.

Moreover, given that utilization has now stayed under 100% for a few days under positive rebases, it also signals that some lenders are willing to keep their assets on Aave instead of withdrawing them at the first sight of positive market conditions.

What does this mean for the progression of the aAMPL pool?

This situation creates two good arguments for why aAMPL could be included in stkAAVE incentives (there is a proposal for this on the Aave governance forum):

  1. Lenders are willing to continue to lend even when they could take their aAMPL out of the pool to receive the full rebase.
  2. Similarly, borrowers are willing to pay high-interest rates for multiple days even though they could borrow just/around the time before rebase.

Conclusion

The month of November was very eventful for the aAMPL pool on Aave.

  • We got to experience how lenders and borrowers react during all three of $AMPL’s cyclical periods.
  • We witnessed lenders earning 180,000% APYs and borrowers earning billions and even trillions of % APYs.
  • We saw the aAMPL pool grow in liquidity from ~$8.0M at the beginning of the month to >$20.0M at its peak — yes I know this liquidity is still relatively small, but it is growing!
  • We saw the aAMPL pool’s generated revenue grow from $2.2M in October to $6.0M in November!
  • We saw $AMPL become the 2nd largest revenue generator on Aave V2 with $6.0M (19.44% of total) revenue generated. And don’t forget, it got to this position with very little liquidity (only $8.0M — $20.0M).
  • And we saw Aave’s protocol-owned $AMPL liquidity grow to become the Aave DAO treasury’s 4th largest holding with 505,543.65 $AMPL worth $686,669 — which is 0.17% of the total $AMPL supply.

Now, take a moment to let all of this sink in.

Okay… in case you haven’t already realized, do you now realize how incredible $AMPL on Aave really is?

It’s a game-changer for the decentralized lending and borrowing space. It’s a game-changer for DeFi.

Now, I’ll leave you with this:

Never before has there been an asset quite like $AMPL. Never before has there been an asset this good for Aave. In the coming weeks and months, watch the synergy between these two protocols unfold.

Things are just getting started ;)

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