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The Evergreen Cycle's purpose is to transcend the boom and bust nature of today's cryptocurrency markets. It's a pair of game-theoretic rules that if followed, fosters growth while leaving room for folks to buy and sell whenever they see fit.
These rules are simply:
Today's market follows precisely two animal spirits, bear and bull, fear and greed. People buy cryptocurrencies in times of greed and sell into safe-assets (USDC/USDT) in times of fear synchronously; creating deep bear markets. These cyclical downturns (termed "crypto winters") are maladaptive and painfully long-lived.
| Greed | Fear | |
|---|---|---|
| Bitcoin | buy | sell |
| Tether | sell | buy |
| Outcome | boom | bust |
But what if a widely-adopted, durable, safe-asset, was collateralized by one or more cryptocurrencies?
Well, assuming demand for this safe-asset propagates into demand for its underlying collateral, one or more cryptocurrencies would simply grow in times of fear, decoupling from the rest. At scale, this sort of counter cyclical demand would give portfolio managers a reason to maintain continuous exposure to the asset class—rather than aggressively withdrawing from the market—because there would always be something growing.
SPOT is a low volatility commodity money that is collateralized by senior AMPL tranches. This means that although SPOT is heavily insulated from volatility, demand for SPOT translates into demand for AMPL through arbitrage.
For this reason, so long as holders retreat into SPOT in times of fear, the bust-phase of the cycle can be broken.
| Greed | Fear | |
|---|---|---|
| AMPL | buy | sell |
| SPOT | sell | buy |
| Outcome | boom | boom |
Things get even more interesting when demand for SPOT emerges from beyond the AMPL ecosystem. In theory, fears of holding any asset could drive demand for SPOT and therefore AMPL.
To be clear, as intoxicating as (boom, boom) sounds, the AMPL <> SPOT rotation game is not a perpetual motion machine. Rotating from AMPL to SPOT is more or less neutral from the perspective of AMPL's market cap.
But it does mean that holders can transition from being "risk-on" to "risk-off" without putting downward pressure on AMPL, keeping the asset positioned to quickly attract its next "leg up" wave of demand.
The market hasn't seen anything like this.
It's not unreasonable to believe the peace-of-mind conferred by knowing that a cryptocurrency can grow and hold through macro cycles, will sell itself. And if a single winter was defeated by even a single asset, the market would have no choice but to evolve, irrevocably. Things would never quite bust the same again.
Of course, this sort of strategy can only be successful if a significant number of holders 1) are aware the strategy exists and 2) signal their intent to behave accordingly. So, for self interest, for the betterment of cryptocurrencies as an asset class, and for the simple sake of variety — we should follow the rules of the Evergreen Cycle.
This sort of counter cyclical pressure can only be generated if demand for the safe-asset propagates into demand for the collateral. And this isn't the case for the other assets mentioned.
Broadly, all the other grids conclude that "if nobody sells, everybody wins." In practice, these sorts of games can delay collective selling for awhile, but further magnify and concentrate selling into compressed moments when the selling eventually occurs. As far as we can tell, the Evergreen cycle is the first game that actively encourages people to put risk on and take risk off whenever they feel like doing so.
SPOT is a good place to store value because it has low downside deviations, but can still generate a return over medium to long time horizons. You should sell for USDC or dollars when you want to purchase something that requires USDC or dollars.
Alternatively, you might consider borrowing USDC against SPOT and avoid unnecessary capital gains (like borrowing against a home). See Asymmetry Finance.
SPOT is a low volatility derivative. It is a one-directional claim on a basket of collateral that has no peg and no death-spiral minting mechanics.
Instead of a peg, SPOT has a bounded range of volatilies. In its typical state, where all the tranches in SPOT’s collateral set are fresh, the token is stable. In the system's most extreme imaginable condition, the tranches in SPOT’s collateral set mature into raw AMPL temporarily, after which the system can recover.
For more context, read: The SPOT Flatcoin — A Low Volatility Derivative.
The SPOT token is created by reorganizing the volatility of its underlying collateral asset (AMPL) into two derivative assets (SPOT, stAMPL).
Because the demand for stability and volatilty come from different investor profiles there are often imbalances in demand for SPOT and stAMPL. Much as Ethena's USDe harvests imbalances in demand for short and long ETH positions, SPOT's (enrichment) yield is harvested from imbalances in demand for SPOT and stAMPL.
To learn more about it see: Enrichment & Debasement.
Read the SPOT Primer to learn more.