(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!

(1) There is plenty of interviews and info around the token so I won’t go into detail here; 0.98 USD ICO, ~$1.25 today (which by the way you are underwater in $BTC terms if you enrolled in 1st round). ~6 mm USD float, ~60 mm USD market cap.

(2) Impressive team w/ guys from Google & Uber; @joeykrug, Brian @coinbase, and they even got Niall Ferguson (wiki him, legit scholar). Amongst the investors FBG is known for pumps so there’s that. Overall a stacked team that can tell a good story.

(3) 1st thing is AMPL IS NOT PEGGED. Most people don’t read and missed this important nuance. Your portfolio value V is calculated by 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.

(4) …to break it down further, 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 price is stable, as long as it’s higher than 1.05, your portfolio value increase as Q goes up slowly.

(5) I can see this make for a great narrative – a double-kill so to speak for retail – not only can the price pump, but your holding size also increases. At $6 mm USD float, it really doesn’t take much at all to (a) pump and (b) keep AMPL at above $1.05.

(6) …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.

(7) …before that, as long as wealth gushes in and pumps / keeps price above $1.05 USD, everyone (including the team) gets to become richer everyday simply by the virtue of Q every increasing. So why do I call it “misleading signals”? It’s simple…

(8) The natural assumption on holders would sell above 1.05 and buy below 0.95 is a mirage initially. One may assume trades would naturally take price or average in, but the reality is given the doublekill on the way up, most people would hold and promote this get-rich scheme…

(9) …leading to more unsuspecting folks piling in (jeez, if I make money by both price going up and more tokens every day, where do I sign up?). The result in an expansionary cycle could be exponential (P*Q) expansion of one’s portfolio value. Slick story to spread.

(10) …and by the way, the finance jargon thrown out by the team is kind of bullshit – it’s not the price one should look at, but the value of P*Q, and that’s going to correlate with liquidity as well as crypto performance. Don’t let that mislead you believing its uncorrelated.

(11) But here’s the true killer, when price dips below 0.95 and enters contraction, I can totally see a double whammy – you lose value on price, and by the way the amount of tokens you own shrink every day. Who in the right mind will act as “central bank” to stabilize?

(12) …so selling will beget more selling from the holder / trader base, while the “stabilizers” will wait until it looks like it may bottom; after all, catching a falling knive when P*Q both shrinks rapidly can be extremely painful, and this brings me to the final point…

(13) AMPL is anything but stable. Liquidity driven expansions and contractions coupled with animal spirits + unsophisticated investor base is going to lead to extreme booms and busts in overall token value (P*Q), which may not be observable to the casual observation of P.

(14) It reminds me of a puppy I used to own – I myself is the 1 dollar, the puppy in this case the price of AMPL when I walk my puppy. It always rushes ahead of me, or lags behind me, but very rarely and briefly tags along me. Caveat Emptor.

Feedback welcome. @AmpleforthOrg