The Upcoming AMPL Flywheel, Powered by SPOT
Last week, the Ampleforth Vault v2 went live, in short, enabling instant swap redemptions from SPOT > AMPL or AMPL > SPOT.
SPOT has always been redeemable 1:1 for AMPL, but until now, the redeemed tokens were delayed for 3 weeks to mature, resulting in quite a large price gap between AMPL and SPOT.
This new Vault v2 will, and is, bringing the prices together as they should be due to the arbitrage now possible instantly. We saw this working immediately after the v2 launch, with several wallets instant swapping AMPL to SPOT, bringing the SPOT price slightly down and the AMPL price slightly up.
Due to weekly rollovers of the underlying collateral, there is currently a limit to the amount of SPOT that can be minted every week (or instantly redeemed). So, this is the bulk of the arb until Wednesday/Thursday, when it WILL happen again.
More SPOT will be minted through the instant AMPL redemptions to SPOT, and more arbitrage will occur from this, again bringing the SPOT price down slightly and the AMPL price up.
It might take 1–2 more weeks to really bring the prices in line, but if you think carefully, this is the start of a powerful, sustainable flywheel for AMPL powered by SPOT.
That’s Not All…
SPOT is highly profitable as a yield-bearing asset. It is near stable (not a stablecoin, but a flatcoin)
This means that as an asset pair in liquidity (likeETH-USDC, or DAI-USDC pairs, etc), SPOT is a perfect middle — it is not a stablecoin but an inflation-resistant flatcoin. It has low (but some) volatility and always returns to its target of $1 + the added rate of inflation (this is determined by AMPL’s price target).
This means you get the safety of a stablecoin, a hedge against USDC inflation, and gain some mild volatility of price variance — which means more trade volume and more Arb through your token than if you paired to USDC.
SPOT has some of the volatility of ETH and most of the stability of USDC. This manifests as a MUCH higher APY.
Let’s have a look:
DAI-USDC (2 stablecoins paired) is 0.5% APR:
USDC-SPOT is 41% APR (a stablecoin paired to SPOT flatcoin):
Looking deeper at the USDC-SPOT pool, the APR has increased from 0.5% to 41% in the last 3 months when ampl has risen and been more volatile:
The volume has been even higher since the Vault V2 launch, with a $380k volume day (the day of the launch).
Importantly, note that this is on super low circulating supply of SPOT (only 850k minted), and pretty low liquidity (only around $500k on the main SPOT-USDC pool). We are seeing 50–80% trade volume against available liquidity (which is super high), and this is what results in the 40%+ LP yield APR.
Enter the AMPL Flywheel
What happens next is that more SPOT will be minted, and the arbitrage and trade volume will be even higher. We know this because, on the launch of Vault v2, an extra 360k SPOT was minted for this arbitrage (we’ve gone from 850k minted to 1.21 million).
When the collateral rollover happens this week, we will have availability for more SPOT minting and will likely see another 300k+ minted and more arbitrage. Within the next month, we will likely be in a range of $2–3 million SPOT minted.
With every instant mint/redeem of AMPL or SPOT, there is a 5% fee, which goes into the Vault, shared between all AMPL Stakers.
This means Vault LPs will be capturing massive amounts of transaction fees in addition to the massive upward pressure on AMPL’s own supply as demand for SPOT increases.
Once this takes off, there is quite literally no ceiling as AMPL has infinite scalability (and by extension, as an AMPL derivative, so does SPOT).
