Ampleforth (AMPL) Freefalls After Breaking Below $1; Will it Continue Dropping?

• Ampleforth is currently caught in the throes of an intense downtrend that has caused it to decline significantly
• This comes as its economic structure begins having adverse impacts on its price action
• Analysts are widely noting that this sort of price decline is essentially by design, due to its elastic circulating supply
• Despite being designed to trade around $1 – a level that it has since broken below – it may not see a sharp recovery anytime soon

Ampleforth was previously one of the hottest tokens within the DeFi sector, but its price is now seeing intense downwards pressure that has caused it to shed the vast majority of its value.

The cryptocurrency is trading 30% below its intended peg of $1 and is showing immense signs of weakness as investors flood out of it in droves.

AMPL is unique because of its elastic supply and regular rebasings. These daily events cause its supply to be adjusted in a way that drives the price towards $1.

Speculators, however, took this as an opportunity to try to trade these supply changes, making Ampleforth prone to seeing immense volatility in recent weeks.

Analysts are now noting that the crypto is likely to enter a period of supply contraction that gets “painful for holders” until eventually, the weak hands exit the asset, and it begins stabilizing.

Ampleforth Price Drops by Nearly 50% in Past 24-Hours

At the time of writing, Ampleforth is trading down 45% at its current price of $0.71. This marks a massive decline from its weekly highs of nearly $3.00 and an even greater decline from its all-time highs of over $4.00.

This is one of the first DeFi tokens with a unique economic structure to see a sharp decline.

Analysts are noting that this isn’t too surprising, as its elastic supply adjustments work to swing the price in both directions.

Because droves of investors are flooding out of AMPL, its price may continue facing downwards pressure in the near-term.

Here’s What Analysts Think Will Happen Next for AMPL

SpartanBlack – a fund manager and popular analyst – spoke about the embattled token in a recent tweet, explaining that the ever-increasing supply inflation was bound to have an impact on its price.

“We warned about this. Reflexivity cuts both ways. You cannot have ever increasing supply inflation and not a consequence on price. This is how the protocol was built.”

In response to a user asking about what may come next for Ampleforth, the analyst added that it would likely go through a period of supply contraction.

“Most likely we go through a period of supply contraction which could get increasingly painful for holders until the weaker hands are completely flushed out.”

It is possible that this ongoing selloff could cut even deeper before its price is able to start stabilizing.

Featured image from Unsplash.