Will Any $USDC/$USDT Liquidity Providers Switch to $AMPL?
TLDR: Yes. It’s inevitable.
Ok, there’s a debate of whether the “safe, risk-off, slow whales” who provide $USDC or $USDT would ever sell some $USDC into $AMPL and lend it out?
Some people don’t think so, and they have a point. The logic is; these people aren’t degens, they like safe, stable markets.
However, the numbers are staggering — It would take more than 10,000 YEARS for the $USDC guy to earn the same amount as he would earn in 1 year if he were lending out $AMPL (taking simplified numbers of $USDC at 7% APY and $AMPL at 90,000%).
But in reality, we can assume that this rate won’t last for a whole year. So let’s do a smaller timeframe with a $10 million deposit of $USDC and simplified math to a round 7% annualized APY:
For lending $USDC, if we break down 7% over 365 days = $700k profit over the year. He earns $1,335.89 daily.
AMPL on the other hand is much bigger.
If we break down 90,000% over 365 days it would technically be approx 1.88% daily, compounded). Or on $10 million, he would earn $188,015.47 daily.
So, in one day lending $10m of $AMPL, he earns what it would take 140 days lending out $10m of $USDC!
What's the actual risk?
There is risk, of course. $USDC is a stable asset, $AMPL is more volatile.
The risk is getting stuck in the Aave pool, your $AMPL being 100% borrowed out and you are unable to withdraw, then $AMPL gets shorted down to $1.00, and you lose more in price ($) loss than you would make from interest even at 90,000%.
This is extra dangerous as the price may crash but if the $AMPL you deposited into Aave is all borrowed out you won’t be able to claim it back and sell it to get out of your position.
So, what you are betting on is that if you buy in at $1.50 say, that you can make more than a 33% ROI, so that even if the $AMPL price crashes to $1.00 you are at break-even or above.
At $1.00, there should be $AMPL deposited back into Aave again (as people are borrowing to take advantage of positive rebases but at $1 there wouldn’t be any).
This *should take approx 23 days if the APY stays at 90,000% (i.e. in 23 days you earn just over $5million in APY fees against your $10m deposit)
How to do it to almost ensure you are SAFE ;)
Here’s your method whales — Don’t buy $10m of $AMPL in one go. It would increase the price TOO much, and the liquidity that you provide to Aave would be available to shorters.
Instead, take $500k a day for 23 days. This will:
- Give a reasonable level of buy support so that the price stays above $1.50.
- So that $AMPL continues to positively rebase.
- While not flooding too much new $AMPL into Aave which could be grabbed to short.
- And also not flooding too much $AMPL into Aave to lower the APY rates if it doesn’t all get borrowed.
This should give a high chance of the $AMPL price staying above $1.50 for the duration while also keeping the lending APY high to guarantee you profit.
Simply put, large $USDC lending/farming whales are risk-off actors, but us normies just think in absolutes — either all in or all out — in reality, a strategy like this, slowly edging in, and aiming to allocate a smaller % of their assets to a higher risk category is the norm.
Expect to be seeing this soon! And remember, we’ve used figures of “only” $10 million here but remember there is actually over $7 BILLION in stablecoins on Aave. If “only” 5% of this moves over, then this is $500 million moving into $AMPL.
Lastly, to the Stablecoin whales reading this — there is a definite advantage for the first mover to do this ;)
If you found this piece interesting, check out its precursor — “Why AMPL on Aave will be a Billion $ + Pool Like USDC”