Documenting AMPL, SPOT Q1 2024 Review
TL;DR
- AMPL Token: Since Q4 2023, AMPL witnessed a bullish run, growing its supply from 25 million to 240 million tokens, achieving a 10x return over six months. Its price slightly increased from $1.14 to $1.179 despite being below the US CPI inflation rate for 2023.
- SPOT Token: SPOT experienced minimal price action except for a supply reduction from 900k to 760k tokens, momentarily spiking its price to $1.60 before stabilizing at $1.19. The token remained stable on-chain, with significant liquidity added on Aerodrome, a Base-native DeFi platform.
- SPOT Vault v2: The upcoming Vault v2 introduces direct AMPL-SPOT swaps within the vault for a 5% fee and implements a Dynamic Rotation Fee to balance demand between stability and leverage. This is expected to improve liquidity, arbitrage opportunities, and responsiveness to demand.
- Market Impacts: Vault v2 aims to reduce price deviations between SPOT and AMPL and make SPOT’s supply more elastic to demand. The update is pending a community vote and implementation.
New Resources
SPOTlight Series 3: Analyzing the Past 90-Day Performance of AMPL vs. stAMPL
Be the Bank with Ampleforth’s SPOT Vault v2
SPOT v2 — The Path to Counter Cyclical Demand by Evan
How Spot v2 Makes Arbitrage More Efficient by Brandon
Performance Reviews
AMPL Token
Since Q4 2023, AMPL has been on a significant bullish run. Looking back to last year, AMPL started the month of October with a total supply of 25 million tokens (or $29 million market cap). By January 1st, AMPL had reached a total supply of over 100 million (approximately 4x in a single quarter).
As we step into Q2 2024, AMPL’s supply peaked at 252 million tokens before slightly retracting to 240 million. Over the past two quarters, AMPL has delivered a return of just over 10x, a testament to its robust performance.
In 2023, AMPL’s price target increased by 2.6% from $1.14 to $1.17. This was slightly below the reported US CPI inflation for 2023 at 3.4%. Since January, it has appreciated to $1.179, up nearly $0.01 to start the year (~0.8%).
SPOT Token
SPOT’s price action over the past quarter was largely uneventful, save for the launch of SPOT on Aerodrome and its two trading pairs: USDC/SPOT and DUH/SPOT. The former has a TVL of over $250k as of April 2024, while the DUH pool has ~$10,000. Aerodrome is a Base-native DeFi platform among the first marketplaces on Base to offer SPOT liquidity.
The significant price increase on SPOT came from a reduction in its total token supply, which contracted from nearly 900k to its present amount of 760k. The reduction led to SPOT reaching a price of over $1.60 per token until returning to fair value at $1.19.
Other than this, SPOT spent the majority of the past year on-chain, hovering between $1.14 and $1.15, remaining extremely stable (though this has been at lower volumes). At its current token supply and price value, SPOT holds a market cap of $900k ahead of the Vault v2 release expected in the next few weeks to months.
Ecosystem Updates
Documenting AMPL Library 1.0 Release
Released this year, the Documenting AMPL Library 1.0 serves as a key community-driven learning resource that covers all the ins and outs about the Ampleforth ecosystem and its basket of assets and derivatives. Inside the library, you will find full trading guides on how to buy, use, and sell AMPL tokens, definitions and explainers to all ecosystem infrastructure, and an archive of previous Documenting AMPL publications.
There is more content to come with Library 2.0, where additional trading guides will be created for SPOT and stAMPL, as well as updated and improved documentation on ecosystem infrastructure, like the SPOT Vault v2.
Check out the Library here: https://www.documentingampl.com/docs
SPOT Vault v2
Vault v2 introduces significant enhancements to the SPOT protocol’s mechanism for maintaining a stable value storage system through the automated rotation of AMPL tranches. These updates are geared towards improving liquidity, arbitrage opportunities, and the dynamic balancing of demand between stability and leverage.
Vault v2 introduces the ability for users to swap between AMPL and SPOT directly within the vault for a fixed percentage fee of 5%, aimed at providing liquidity and facilitating arbitrage.
When there is excess capital, the vault allows the swapping of AMPL for SPOT by tranching excess AMPL into seniors and juniors, using seniors to mint SPOT, and returning SPOT to the user while holding juniors until maturity. Conversely, swapping SPOT for AMPL involves redeeming SPOT for senior tranches, melding them with juniors already held to form AMPL, and returning AMPL to the user.
Dynamic Rotation Fee to Balance Demand
Vault v2 also implements a Dynamic Rotation Fee. This fee adjusts based on the relative demand for stability and leverage, calculated using the deviation ratio:
(dr=requiredRolloverCapital/totalRolloverCapital)
In other words, the deviation ratio measures the balance of assets in the Vault relative to the total supply needs of the SPOT collateral. The system does not charge a fee when dr=1 indicating a balance between the required rollover capital and the total rollover capital in the Vault.
When dr<1, there is not enough AMPL in the Vault then is required to sustain the SPOT collateral set. There is a higher demand for stability than leverage, which strains the Vault’s resources.
To address this imbalance, the system applies a positive rotation fee. This means that SPOT holders (seeking stability) pay a fee to vault holders, which debases SPOT’s value. It is essentially an inflationary mechanism to encourage more participation in the vault by making it more costly to seek stability. This helps to bring new capital into the vault to reach a balanced state.
Conversely, when dr>1, the vault has more AMPL than required for the SPOT collateral. This indicates a surplus, or a higher demand for leverage, as there’s more capital available than is currently needed.
In response, a negative rotation fee is applied. This might sound counterintuitive at first, but what it means is that vault holders (who are effectively providing the leverage) pay a fee to SPOT holders. This is a form of enrichment for SPOT, as it increases its value relative to the senior AMPL tranches.
The aim here is to disincentivize excessive contributions to the vault that are not needed, encouraging a withdrawal of some capital or a reduction in new entries, thus moving towards a balance.
Market Impacts
It should be noted that Vault v2 is not currently live and will still require a vote and implementation before it can launch. Nevertheless, several impacts and changes should be expected when Vault v2 goes live.
By enabling direct swaps between SPOT and AMPL, the v2 updates aim to reduce price deviations, encouraging closer price alignment through mint/redeem arbitrage. Additionally, the introduction of swapping and dynamic rotation fees is expected to make SPOT’s supply more responsive to demand, potentially leading to an increased minting of SPOT in response to higher demand and redemption during lower demand periods.
Q2 2024 Outlook
With the Bitcoin halving expected sometime here in April 2024, history suggests that the true crypto bull market run is coming sometime between Late Spring 2024 and Summer 2024. Regardless of direction, AMPL has had its most impressive start to the year since the famous DeFi Summer in 2020, when it ran from just a few million in market cap to nearly $1 billion.
While Documenting AMPL is not in the business of making market predictions, what we can say is that with the significant development in usability surrounding AMPL and SPOT, the Ampleforth ecosystem has the means internally to experience significant growth — even if that growth stems primarily from Vault v2 volumes.
Stay tuned for more information as Vault v2 is released and continue stacking your AMPLs!
