Doc's Daily Commentary

Mind Of Mav

Is ApeCoin ($APE) An Opportunity Or A Terrible Idea?

 

The Bored Ape Yacht Club (BAYC) is a popular non-fungible token (NFT) collection based on the Ethereum blockchain. It has absolutely exploded this week, so let’s discuss if it’s a good idea to ape into it . . . 

Made up of 10,000 unique Bored Ape NFTs, the collection ranks as the second-largest by trading volume. While this can seem like a lot for a digital avatar, investing in a BAYC NFT has been lucrative thanks, in part, to the launch of ApeCoin. Bored Ape NFT holders were eligible to claim a share of the ApeCoins that debuted earlier this year as the official cryptocurrency of the BAYC ecosystem. 

Below we’ll explore ApeCoin’s peculiar launch, tokenomics, and future outlook.

What is ApeCoin?

ApeCoin was officially released on March 16, 2022, as “a token for culture, gaming, and commerce” and is the main cryptocurrency of the Bored Ape Yacht Club ecosystem. Trading under the symbol $APE, the Ethereum-native ERC-20 token has a market capitalization of US$4.02 billion, according to data by CoinMarketCap. About 28% of ApeCoin’s fixed supply of 1 billion tokens is in circulation. 

ApeCoin has utility as the membership pass and governance token of the ApeCoin decentralized autonomous organization (DAO), where every token holder can vote on the use of the Ecosystem Fund or cast their own proposals. The token can also be used as an open currency for payments and transactions without centralized intermediaries.

The ApeCoin DAO and how it launched $APE

One of the peculiar things about ApeCoin is that it wasn’t actually launched by Yuga Labs, the founding team behind the Bored Ape Yacht Club. Instead, $APE was introduced by the ApeCoin DAO.

ApeCoin saw 62% of total minted supply allocated to the community, while 15% of minted supply was airdropped to Bored Ape Yacht Club and Mutant Ape Yacht Club holders. Holders of a Bored Ape NFT were eligible to claim 10,094 tokens, while holders of Mutant Ape were eligible for 2,042 tokens, or a windfall of US$184,620 and US$37,350 respectively at the recent price of US$18.29 per token. Bored Ape Kennel Club NFT owners were not eligible to claim the coin.

NFT holders were free to cash out their ApeCoin holdings from the first day of trade. The rush to secure windfall gains was cited as one reason for volatility in the token during its trading debut on March 17, which rose from US$1 to close at US$8.52 per token. 

Additional upside of ApeCoin may be limited by the future expiration of the lock-up provisions on the tokens granted to contributors. For instance, Yuga Labs received 16% of the token’s total supply, with an initial lock-up of 12 months, meaning that they can’t cash out their tokens for that period. Following that, 4.167 million tokens will be unlocked every month for 36 months. The 8% of the token supply allocated to BAYC founders also has a similar lock-up period of 12 months, while the lock-up period on the 14% airdropped to launch contributors gradually expires at the 6-month, 12-month, and 18-month mark for the majority of the tokens.

What does the future hold for ApeCoin?

One factor to consider is that the token wasn’t launched by Yuga Labs, despite its role as the official token of the BAYC.

However, the ApeCoin DAO recruited some prominent board members — including Animoca Brands co-founder Yat Siu, FTX’s Amy Wu, and Reddit co-founder Alexis Ohanian — to oversee the DAO and the token’s future development. The initial board will serve for six months, after which DAO members will vote for new board members annually. ApeCoin may also gain from wider adoption in the metaverse and daily transactions. Blockchain game company Animoca Brands announced in March that it will adopt the token for a new project being developed with BAYC. Among other positive signs, NFT marketplace NWayPlay announced earlier this year it will adopt ApeCoin for a BAYC-based play-to-earn game currently in development, while E11EVEN Residences, a property development company in Miami, said it would accept the token for “purchasing condo units”.

ApeCoin also scores well in terms of the ability of investors to access the token on major exchanges such as Binance and Coinbase, while its rising popularity is also drawing attention from smaller exchanges targeted toward younger retail traders.

The ultimate success of ApeCoin depends on its real-world adoption. Looking ahead, the token appears poised to benefit from increased utility in Web 3.0, especially when projects by Animoca Brands, NWayPlay and other game-makers are released. 

 

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