Maple Leaf Capital Warns About Bitfinex’s Ampleforth (AMPL) Token’s Stability and Low Volume
Earlier this month controversial exchange Bitfinex launched their token Ampleforth (AMPL) on their Initial Exchange Offering (IEO) platform, Tokinex. They did record-breaking fundraising raising up to $4.9 Million in 11 seconds.
However, Maple Leaf Capital has come out and said that they see problems in the Ampleforth tokens. In their opinion, it is highly unstable.
(0) This will be a thread about Bitfinex’s 1st ieo – Ampleforth $AMPL. Whilst with a novel token mechanics, it is anything but stable (faaaar from it, and may not be so even at scale). The somewhat misleading signals might fool many initially, but it’s great trading sardine!
— Maple Leaf Capital (@MapleLeafCap) June 27, 2019
This IEO sold off 10% of Ampleforth’s total token supply. They propose to be a token that is balanced around an equilibrium price target but says that it does not qualify as a stablecoin, at least initially. The cryptocurrency is intended to periodically add or subtract tokens from an investor’s holdings in order to match exchange rate fluctuations, meaning that it has a correspondingly fluctuating market capitalization.
In theory, it all sounds good, however, Maple Leaf Capital says that it doesn’t that way in practice. They point out that AMPL is not pegged.
“Most people don’t read and missed this important nuance. Your portfolio value V is calculated by the price of token (P) * # of tokens you hold (Q), and AMPL’s mechanism dictates that Q goes up /down if P deviates too much from 1 dollar.”
They further say that, if the price stays above $1 dollar (1.05 to be precise), every day that it does, you get (Price – 1.05) / 30 more tokens. So even if the price is stable, as long as it’s higher than 1.05, your portfolio value increase as Q goes up slowly. They go ahead to point out the scaling issues the token might face.
“Only when AMPL scales to say billions of dollars, the wealth it takes to deviate AMPL away from 1 would increase significantly, and only then would the price be more “zoned” around 1; but the team laid out no roadmap on how to get there. Before that, as long as wealth gushes in and pumps / keeps price above $1.05 USD, everyone (including the team) gets to become richer every day simply by the virtue of Q every increasing.”
Although many agree to these criticisms, some point out that there is a situation where the supply could be inflating for a long time creating the virtuous circle mentioned earlier.