I got this question today over email and I thought I'd post it here with my answer here as well.

I'm still stuck with a core question regarding the incentive to hoard / sell AMPLs, and wondered if you could help me out with this:

How does adjusting the supply change these incentives (as mentioned on your website: “...This automatic supply policy is countercyclical and nondilutive, making the Ample immune to both runaway inflation and runaway deflation”)? 

At a system level -- since everyone gets the same amount added / removed from holdings -- don’t you still have the same effect? I have a hard time understanding how this makes AMPLs immune to runaway inflation/deflation.

If you haven't already, I recommend reading this whitepaper we published in collaboration with our academic advisors at the Stanford Hoover Institute. It goes into the different incentives in the market.

At a high level it's a mistake to assume that every actor in the marketplace has the same trading thesis and risk preference. Some people are generally holders, and some people are generally traders who like volatility. You can clearly see this in traditional markets, so this is nothing specific to crypto.

For example, "index fund" types will happily lend equities to short-sellers. The lenders there look to get predictable small gains, the short-sellers look to get shorter-term profits from volatility. Two different traders with different profiles meet, and these transactions happen. If everyone was the short seller or everyone was the lender this wouldn't take place.

Similarly for AMPL, there are generally holders and generally traders. Traders like to make profits on volatility. So even though the system makes the same adjustments across wallets, it doesn't mean that every trader reacts to it the same way. When there's an expansion (or contraction) from rebases, there's a mechanical change to the system. This temporary increase (or decrease) in Price x Supply creates sell (or buy) pressure that doesn't exist for other assets.

That said, while AMPL's market cap is so low, it might very well be the case that most actors in the system are speculating on overall growth. When that's the case, AMPL may act similarly to a deflationary asset like BTC. That's not unexpected, and not necessarily a bad thing right now. The deflationary nature of BTC was definitely important in its early growth. Bootstrapping value is not an easy thing to do.

The problem with BTC was that there was no future release valve for this deflationary quality. We don't call AMPL a stablecoin right now, because it may be highly volatile in its early life. That's ok.

However, wouldn't it be nice if there was a BTC that evolved into a stablecoin? While not exactly precise, I think it's an easy way to think about AMPL.