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/ Ampleforth

Ray Dalio: Correlation 'Holy Grail'

Ray Dalio: Correlation 'Holy Grail'

In the video “Ray Dalio breaks down his ‘Holy Grail’”, he sets out to break down what were the marginal benefits of diversification within a portfolio. Ultimately, using the graph below, Ray Dalio broke it down into 3 pieces: Risk, which he called the standard deviation, the number of assets or the sample size, and the correlation of the bets.

Ray Dalio Discusses His Diversification "Holy Grail" 

What he found in doing so was the higher the correlation between assets in a portfolio, the lower the ability to reduce risk by increasing the number of investments. Essentially what this means is if you take a group of investments that are 60% correlated, there is no real reduction in risk after adding more than 4 investments to the portfolio. It’s only in diversifying your portfolio that allows you to cut your risk.

Correlation of Assets Impact on Risk and Return

Dalio says for an ideal return on investment, investors should find 15-20 good, uncorrelated return streams, as that will allow for the most return on investment while cutting risk. In taking 15-20 good investments, with a 0% correlation, using Dalio’s chart, the return to risk ratio is 1.25, meaning the probability of losing money in a year is 11%. With any one investment with a 10% risk, the probability of losing money in any given year is 40%, almost 4 times as much.

What this all boils down to is the power of diversification in balancing risk. There is no great 1 best investment, but you are able to improve your return to risk by 5 times as much when diversifying across 15-20 good investments.

Since Bitcoin was created, it has shown to be an asset that is uncorrelated to the stock market. This provides investors with a tool for diversifying their portfolio, but many investors prefer to have more than one tool. Since Bitcoin thousands of altcoins have come onto the scene. Combining Bitcoin, all altcoins and all future projects has the resulting effect of an entirely new asset class: Digital Assets.

That begs the question: How does this relate to digital assets? You need only look at Bitcoin and the subsequent other similar coins found in the market to see the issue in diversifying your digital assets. Correlations within the crypto space are for the most part high, but there are a few different coins that break the mold of digital assets, which allows investors to diversify and improve their return to risk. One such token is Ampleforth, whose movement pattern in reality should have a much lower correlation to Bitcoin. For those who subscribe to modern portfolio theory and have a mindset like Ray Dalio, seeking out digital assets that don’t correlate strongly with Bitcoin may allow investors to improve their return to risk, while digital assets on the whole may help reduce correlation to other traditional holdings.

To learn more about modern portfolio theory and how it can apply to digital assets, check out our piece on the subject which you can find here.

/ Ampleforth

1971 Nixon Shock: The End of the Bretton Woods System

1971 Nixon Shock: The End of the Bretton Woods System

In 1971 United States monetary policy changed in a major way. President Richard Nixon announced that the US dollar would no longer be redeemable for gold or other reserve assets. This effectively ended the Bretton Woods system and with the end of that system came a new period in US and global history.

This was an important moment in history, but it’s also important to understand not just what happened, but how the instruments at the center of the story, gold and US dollars, operate. By understanding their functions, as well as their limitations, we can begin to look forward with a plan to overcome their shortcomings.


This video dives into what exactly happened in 1971, and what compelled the US government to take the bold action they did. It also discusses the advantages and disadvantages of gold and dollars as both long term stores of value and mediums of exchange.

We still have gold and dollars. But this summer, we will have something that learns from their failures. We will have the first synthetic commodity money: Amples. Please check out our website and Red Book to learn more!

/ Ampleforth

Ampleforth at Consensus 2019

Ampleforth at Consensus 2019

Ampleforth is excited to announce that our team will be attending Consensus during Blockchain Week NYC in May! We look forward to engaging with our community and peers in the crypto and financial worlds. Representatives of Ampleforth will be participating in numerous panels and events throughout the week in New York. We invite you to celebrate blockchain with us by attending and meet some of our team members, investors and advisors!

The most notable moment for us will be when Ampleforth advisor Niall Ferguson of the Hoover Institution will be joined by Coinbase founder Brian Armstrong to discuss the history and future of money. This panel will take place on May 15th at 9:30 AM EST.  

Additionally, preceding the panel with Brian Armstrong, Niall Ferguson will be speaking about the Historical Perspective of Cryptocurrency. This will be held on May 15th at 9:00 AM. Niall has authored 14 books on history, economics, and currency. Niall’s books include 'The Ascent of Money: A Financial History of the World' and 'The Square and the Tower: Networks, Hierarchies, and the Struggle for Global Power.'   A complete listing of these events can be found on the Consensus 2019 agenda under the May 15th tab.

Be sure to find our team & community members on May 15th during Niall’s events, and follow us on Twitter (@AmpleforthOrg) for news and updates during Blockchain Week NYC.For more information and to learn what we are up to at Ampleforth join our Telegram and of visit our website Ampleforth.org


*** Update ***

After this post was made, and prior to Consensus, Niall needed to cancel his appearance for personal reasons.

Please stay tuned for future commentary and appearances from Ampleforth Advisor Niall Ferguson in the future.

/ Bitcoin

Don't Roll Your Own Econ

Don't Roll Your Own Econ

Don't Roll Your Own Crypto Econ

Decentralization was always an interesting thought, largely unachievable at scale until the advent of the digital world and peer to peer (p2p) technologies. These p2p technologies opened the door for a new digital revolution in Bitcoin. Since Bitcoin was created tens of thousands of individual blockchain projects, Dapps, and tokens are currently being developed. Every day more and more of these projects are launched, live and functioning. Like most burgeoning industries, there will be an extremely high attrition rate, and many projects will fail. Some of the mistakes that cause projects to end in bitter failure are easily avoided. Although digital assets are new and cryptocurrencies, including Bitcoin, are at the bleeding edge of technology, we can look to the past for some time tested lessons and concepts that can help us avoid simple mistakes.

One of those time tested ideas was pointed out in an article from late 2017 by Ethereum developer Nick Johnson.The article is a phenomenal read, and certainly a strong piece for anyone who may be interested in cryptocurrencies and cryptography. In the article Nick pointed out very serious concerns he had at the time with IOTA’s viability as a cryptocurrency. One of the most important lessons from the piece was what Nick states as rule 1 of cryptography - don’t roll your own crypto. It’s enticing for some teams to think they are beyond the blocking and tackling of basic rules like this as they aim to innovate and push the envelope of current technology. However, the lesson can not be ignored, and teams should not fly in the face of battle hardened and time tested cryptography. Read more in the article, but a grossly inappropriate TL;DR explanation would be that cryptography is under constant attack, and only crypto that has been mercilessly pressure tested and held its ground can serve as secure crypto you can depend on.

Let’s not get it confused, innovation in blockchain is one of the things that makes it great and the future of digital assets so bright. We need teams to innovate and invent in order to usher in advancement and better tech. However, there are areas that are ripe for innovation, and there are areas that are solid. Just like cryptography, sound economic principles are foolish to mess with. Just like the relentless attacks that proven cryptography has endured, economic principles have weathered many storms over long periods of time. Economic principles that work have survived and flourished with changes in administrations, changes in bull and bear markets and even changes in dominant government systems.

At Ampleforth, we’re innovating and creating, and we’re doing it with strong base principles in place. When it comes to economics we’ve sought out a team of advisors with the expertise and experience to not only avoid pitfalls, but truly innovate. Among the group of top level minds we're lucky to consult with are the Hoover Institution’s Niall Feguson and Manuel Rincon Cruz. We’ve also brought in the guidance of experts from Pantera Capital such as Paul Veradittakit and Joey Krug. Joey’s insights from his work at Pantera and Augur help us bridge the blockchain world with the business world in a way that few can. Our team takes a responsible and balanced approach to the creation of our technology by leveraging decades of experience in several fields and the result is a protocol that is proving to be one of the most unique projects created to date.

Reliable and established principles in economics and technology are the foundation of what we are building at Ampleforth. For more detail on the Ampleforth protocol and the innovations we’re making with synthetic commodities and ideal money, please check out our website and whitepaper, and stay up to date by following our Twitter!

/ Cryptocurrency

Cryptocurrencies and Modern Portfolio Theory

Cryptocurrencies and Modern Portfolio Theory

Are your crypto investments truly diversified? What's missing?

Every investor that wants a diversified portfolio should have exposure to cryptocurrency assets — or digital assets as they are sometimes called. Digital assets make up an asset class that has more volume every year and has shown to be uncorrelated to the stock market. One digital asset in particular, Bitcoin, has outperformed the S&P 500 since its inception, and is the best performing asset of any type over the past 10 years. Even Mike Novogratz the Founder and CEO of Galaxy Digital has said every Hedge Fund should hold 1% of their entire Portfolio in Bitcoin as a hedge to the systemic market risks.

In all markets, being correlated with how well the economy is performing has distinct advantages and disadvantages. If the economy is doing well, it often has low unemployment rates, strong productivity and controlled inflation. In these periods of economic boom, it’s good to have assets that perform accordingly. But when the economy starts to slow down and sentiment from markets shift, it is important to have a portion of your portfolio that takes advantage of the market downturn. Traditionally this is achieved through derivatives of underlying assets; however, in recent times cryptocurrencies have provided another way to add non-correlated assets to any portfolio.

What is Modern Portfolio Theory?

Modern Portfolio Theory suggests that the return of an asset should follow the amount of risk that asset has. This means that if an asset has a lot of risk then you should be expecting a higher return from that asset.

Those who subscribe to Modern Portfolio Theory target the best performing assets in multiple industries and asset classes including stocks, bonds, commodities, and in today’s market, digital assets such as cryptocurrencies and smart commodities. These types of investors aim to reduce correlation among the assets they choose for their portfolio, so that they can target high returns, but hopefully hedge downside by choosing assets that move in an unrelated (or uncorrelated) fashion to each other. Investors then weigh their allocations of each asset in their portfolio to maximize returns, as well as to additionally hedge their risk by securing assets that have different levels of correlation to the broader economy.

In today’s market, there is a new opportunity to introduce a diverse asset that has it’s own unique risk/reward profile and a brand new level of correlation to traditional asset classes. That new opportunity is, of course, digital assets like Bitcoin. Having digital assets in a portfolio can add a previously unattainable level of asset mix to an investor’s holdings, and can impact the level of risk and exposure an investor has in a potentially positive way. It’s also quite realistic for retail investors to be able to attain digital assets if they so desire. Digital assets like Bitcoin, Ethereum and other altcoins have provided the first opportunity in recent history for retail investors to add unique assets to their portfolio without requiring them to meet minimum net worth thresholds.

But what is uncorrelated with Bitcoin?

With the critical role uncorrelated assets play in modern portfolio theory, it’s important to hold assets that perform in an uncorrelated way to their broader asset grouping. In the digital asset world, we’re currently in a period of time where price discovery is a metric that gets a lot of attention by the media and it outlines an approach that a majority of crypto investors attempt to use to value and evaluate digital assets. Within the digital asset bucket, it’s important to have alternatives. This is because historically, virtually all digital assets follow Bitcoin’s price movements closely. Investors in digital assets need to have an alternative to current day cryptocurrencies in order to hedge and perform well when the broader asset class is down. With a redundancy in performance from cryptocurrencies following Bitcoin’s price movements, where can we find a digital asset that performs in an uncorrelated way?

Enter Ampleforth. Ampleforth is the first sound money with an elastic supply. The unit is called the AMPL. AMPLs are a completely different crypto model that spreads price information into supply. The Ampleforth protocol aims to achieve price-supply equilibrium, and it does this by expanding or contracting the amount of AMPL for every wallet holder at the same time every day: 4pm EST. This daily expansion or contraction is rules-based and transparent you can find the expansion or contraction rate at the AMPL dashboard. This daily event can lead to a different movement pattern for AMPL than Bitcoin and other cryptocurrencies. Should AMPL show to be uncorrelated over time to other digital assets, that could make it a very interesting tool for portfolio construction. This is because finding digital assets that are uncorrelated with Bitcoin can be advantageous in every crypto portfolio, in the same way that crypto can be advantageous in every asset management portfolio.

Out of all of the industries where investors hope for high returns, where risk and return run hand in hand, digital assets are at the top of the list for many of today’s investors. As the world continues to innovate, and digital assets add to and improve on the options we have for transacting, storing value and even creating new synthetic commodities, it’s important to consider assets that not only capture potential upside, but also include some assets that have their own price movements uncorrelated with Bitcoin. Should AMPL generate movements that differ from Bitcoin in a random way, AMPL could very well be the tool institutional and retail investors need to achieve the risk/reward balance missing from the digital asset space today.