How to Capture Profits from the SPOT Rotation Vault
PreviousCase StudiesNextAnalyzing Gains Captured by Vault Stakers During November 2023 AMPL Rebase Cycle
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There are three simple options for investors that can give traders more or less exposure to AMPL's rebase that this case study will examine:
Holding raw AMPL
Minting SPOT with AMPL at the predefined 80/20 ratio
Staking AMPL in the
Let us assume we are starting with 100,000 AMPL. We will look at this from both a 20% positive rebase and a 20% negative rebase.
This will be the most straightforward to understand. Starting with a value of 100,000 AMPL, in the event of a 20% positive rebase, this will give me:
100,000 AMPL * 1.2 (20% rebase) = 120,000 AMPL
Likewise, in the event of a 20% negative rebase, I will have 80,000 AMPL afterward. Simple.
This is where things get slightly more complicated but interesting for investors. Holding raw AMPL exposes an investor to the full weight of AMPL’s normal rebase: for better or worse.
Starting with a value of 100,000 AMPL, by using the MINT feature available through the SPOT interface, we will have:
80,000 Junior Tranches
20,000 Senior Tranches
So, in the event of the 20% rebase:
Senior Tranches are unaffected by the rebase, so they will maintain a value of 20,000 AMPL. However, Junior Tranches absorb the full effect of the rebase:
80,000 AMPL * 1.2 (20% rebase) = 96,000 AMPL
Thus our total gain post-rebase would be:
Total AMPL Equivalent = Senior Tranches + Junior Tranches
= 20,000 + 96,000 = 116,000 AMPL
Likewise, using the same formula and ratio, in the event of a 20% negative rebase, we will be left with 84,000 AMPL.
This final scenario takes on maximum risk as it is overly exposed to the AMPL rebase mechanism. The leverage is determined by the Rebase Multiplier (calculated based on available liquidity in the Vault). At the time of writing, this value is 1.3x multiplier.
Starting with a value of 100,000 AMPL, we will mint 100% stAMPL original equivalent to our 100,000 AMPL (i.e., 100,000 Junior Tranches) using the VAULT feature available through the SPOT interface.
So, in the event of the 20% rebase:
stAMPL Value = AMPL + (AMPL*(Rebase Percentage*Rebase Multiplier))
Thus our total gain post-rebase would be:
stAMPL Value = 100,000 + (100,000*(0.20*1.3)
= 100,000 + 26,000 = 126,000
Likewise, using the same formula and ratio, in the event of a 20% negative rebase, we will be left with 74,000 AMPL.
The varying scenarios highlighted above elucidate different levels of risk and return, contingent upon the strategies adopted. Let’s break down the percentage gains or losses in each scenario and discern the risk exposure associated with each:
Positive Rebase (20%):
Holding raw AMPL renders a straightforward 20% gain, elevating your holdings from 100,000 AMPL to 120,000 AMPL.
Negative Rebase (20%):
Conversely, a 20% negative rebase diminishes your holdings to 80,000 AMPL, marking a 20% loss.
Advantages: Simplicity, direct exposure to AMPL’s rebasing mechanism.
Disadvantages: High volatility, full exposure to negative rebases.
Positive Rebase (20%):
The mixed tranche structure yields a 16% gain, taking your holdings to 116,000 AMPL equivalent.
Negative Rebase (20%):
Your holdings decline to 84,000 AMPL equivalent in the face of a negative rebase, resulting in a 16% loss.
Advantages: Moderated volatility, partial insulation from negative rebases.
Disadvantages: Capped upside during positive rebases, complexity.
Positive Rebase (20%):
Leveraging stAMPL magnifies the gain to 26%, elevating your holdings to 126,000 AMPL equivalent.
Negative Rebase (20%):
A negative rebase exacerbates the loss to 26%, plummeting your holdings to 74,000 AMPL equivalent.
Advantages: Augmented gains during positive rebases, leverage.
Disadvantages: Amplified losses during negative rebases, higher risk due to leverage.
The leveraging feature of stAMPL presents an enticing prospect for amplified gains, albeit with a higher risk profile. Here’s how stAMPL stacks up against the other scenarios:
Against Raw AMPL:
Positive Rebase: stAMPL outperforms with an additional 6% gain (26% versus 20%).
Negative Rebase: stAMPL incurs an additional 6% loss (26% versus 20%).
Against Minting SPOT with AMPL:
Positive Rebase: stAMPL achieves a superior 10% gain (26% versus 16%).
Negative Rebase: stAMPL suffers a higher 10% loss (26% versus 16%).
The SPOT Rotation Vault unfolds a realm of possibilities for investors to navigate the volatile waters of AMPL’s rebasing mechanism.
By understanding the intricacies of Senior and Junior tranches, alongside the leveraging potential through 100% stAMPL, investors can tailor their strategies to align with their risk-reward profiles.
The comparative analysis accentuates the heightened risk and return profile of stAMPL. Investors eyeing higher returns and willing to shoulder increased risk might find stAMPL an attractive proposition.
Conversely, those desiring a more balanced risk profile might opt for minting SPOT or holding raw AMPL. The choice hinges on an individual’s risk tolerance and outlook on AMPL’s rebasing trajectory.
