How Shorting $AMPL is good for $AMPL. Seriously

Will people borrow $AMPL under $1.00 during periods of consecutive negative rebases?

The answer is yes, they will.

In fact, as of this writing (July 30th), $600,000 worth of $AMPL is being borrowed while the price sits at $0.83:

While all this $AMPL is being borrowed, there have been two consecutive days of negative rebases — July 29th it was -0.67% and July 30th it was -1.66%.

So, why is there $600K worth of $AMPL being borrowed?

“These borrowers must be losing money every day there is a negative rebase, right? Are they out of their minds! Why would anyone do this??”

WRONG.

The people borrowing $AMPL right now are playing 4D chess.

They are on another level of Alpha.

They are profiting by doing this.

Here’s how they do it:

Short $AMPL in a Neg Rebase Period — Turn a Profit

Here’s a scenario for you:

Say you borrow 100,000 $AMPL at a $1.00 price thinking it’s going down — Let’s simplify the math and say this is worth = 0.1% of the supply.

Now as soon as you borrow it, you turn around and sell it immediately — because you think the price is going down.

Say you’re correct and the price goes down to $0.80 within 3 days — you are satisfied with this price drop.

Now you buy back the 100,000 $AMPL at a 20% discount and repay your debt — you close the position 20% up.

Do you follow?

This is how you effectively short $AMPL by borrowing it in a negative rebase period.

Now, if you’re an $AMPL maxi like me, you might be a little upset right now and thinking:

“This is not a good thing… why would you tell people how to short $AMPL? This will only make matters worse during negative rebase periods. This will only further suppress the price of $AMPL!”

WRONG AGAIN.

Shorting $AMPL brings it back to its $ Peg Faster

Remember I said that in this scenario: 100,000 $AMPL = 0.1% of the supply

Here’s why:

With 3 days of negative rebases, the total supply of $AMPL will decrease. Therefore, that 100,000 $AMPL you borrowed at $1.00 is now 0.105% of the supply when priced at $0.80.

So when you buy back the 100,000 $AMPL, you’re actually buying a larger % of the supply than you did when you first borrowed. Therefore, shorting effectively helps to return $AMPL to its target price faster; because when you buy back to repay your debt, you’re buying a greater amount of the $AMPL supply.

So, as ironic as it sounds… shorting will help $AMPL return to its target price faster.

If you enjoyed this piece, you’re going to love this one too: How Lending $AMPL During Negative Rebase Periods Offsets Losses + Increases Your % of Supply

In this next piece, the game of 4D chess continues. But this time the players are lenders, not borrowers.