Marketshare Mastery in the Ampleverse
Ampleforth co-founder Evan Kuo once said, "Ampleforth isn’t your mama's cryptocurrency," and suggested that one should "study Ampleforth for weeks" before acquiring it.
He wasn’t kidding! Ampleforth is a novel cryptocurrency that introduces the concept of supply elasticity based on demand. Because of its unique properties, Ampl also introduces unique opportunities and strategies to increase ownership.
The point of this article is to explore a strategy that is a bit unique in crypto. Leveraging derivative assets to capture market share gains. Why is this important? Because marketshare gains equate to holding more marketshare, and that also may equate to increasing your net worth (not financial advice of course ;)).
One of the core properties that sets AMPL apart is that it is non-dilutive, yet elastic. This means that regardless of how the supply expands or contracts, your market share remains constant. If you hold 1% of AMPL when there’s a 10 million token supply, you’ll still hold 1% when the supply reaches 100 million. Your slice of the pie stays the same, even if the pie grows or shrinks.
The release of Spot v5 makes creating a pair of Spot/stAmpl that is proportional to the underlying amount of Ampl a lot easier. This opens the door for new opportunities to dynamically recalibrate your AMPL exposure to potentially grow your market share without requiring trading expertise.
The Strategy: Volatility Rebalancing
Imagine being able to finetune your portfolio so that you have more than 1 AMPL of exposure during positive rebases, and less than 1 AMPL during negative rebases. For long term AMPL holders, this creates a strategy to "stack gons" (gons are to Ampleforth as to sats are to Bitcoin) that is, accumulate greater market share in the protocol through strategic rebalancing, not active trading.
AMPL is unique in that it allows holders to utilize the protocol's mechanisms to grow their share. In contrast to Bitcoin where increasing market share involves trading, buying dips, mining or taking profits from altcoins. With certain strategies, Ampl enables this internally, via protocol-native options like Spot and stAMPL.
Spot vs stAMPL
With Spot v5, users can mint both Spot and stAMPL simultaneously. This combination is initially equivalent to holding 1 AMPL of exposure. One thing to keep in mind is Spot does not rebase, so stAMPL represents the leveraged rebasing portion and accrues gains or losses.
Case Study 1: Full AMPL Exposure
Assuming a user minted the spot/stAmpl pair with 100 Ampl before a rebase. In both cases, the holder experiences a rebase equivalent to full AMPL exposure.
Case Study 2: Amplify During Expansion
In the previous Case Study, a user mints 1 AMPL equivalent of Spot and stAmpl. What if they want to amplify these holdings such that it will give them more leverage during a time of expansion? One strategy is to increase market share past 1 Ampl. To accomplish this, one would simply have to reduce their Spot holdings. This can be done by redeeming/selling some Spot into Ampl to eventually recalibrate your holdings until it is > 1 AMPL. An example of recalibrating up to 1.05 Ampl is displayed below.
Case Study 3: Reduce Risk During Contraction
Conversely, if a negative rebase is expected, increasing your Spot allocation (which is insulated from rebases) reduces your effective AMPL exposure. One way to accomplish this is to maintain some Ampl holdings so that you can mint or purchase Spot from the market when it’s time to recalibrate. The scenario below has decreased Ampl exposure from 1 to 0.95.
Ampl will continue to rebase until the end of time, imagine gaining just a bit of market share on each rebase, considering there may be 100’s of rebases a year. Ampl doesn’t have to change very much in Market Capitalization for this to be effective. For instance Ampl can have a 20 million market cap this year, and have a similar market cap next year, but if your market share has increased, you will own more of the network along with a potential higher net worth.
Caveats
It may be tempting to gain as much exposure as possible during expansion to leverage or reduce exposure to rebase as much as possible during a contraction. On paper, this makes sense, however, the further you move away from 1 Ampl, the more difficult it may be to recalibrate when the momentum shifts in the other direction. Additionally, the case studies do not account for flash mint/redeem fees for the vault and have the assumption that the user performs any flash mint or redeeming when the fees are negligible or 0.
Final Thoughts
Some may say, why not simply trade Ampl for Spot and vice versa depending on the cycle (a.k.a Evergreen cycle). Why not just buy and hold stAmpl if I am bullish on Ampl? I guess the beauty of the Ampleforth ecosystem is one can pick and choose their own strategy. This is just another option.
These examples illustrate the potential to dynamically adjust your AMPL ratio depending on the market environment. This gives someone flexibility to adjust accordingly, almost on a daily basis if need be. This is not financial advice, and results may vary. But for those willing to engage with Ampleforth unique mechanics, Spot v5 opens a new chapter in leveraging native tools and strategies that “aren’t your mama’s” typical crypto trading strategies.
