2022 has been a horrible year for just about every single cryptocurrency or blockchain-based asset. There are numerous examples of the breadth of the speculative mania that was digital assets from 2020-2021, but the best example of deviation from value reality may have been from the Bored Ape Yacht Club (or BAYC) NFTs. I detailed what I felt was a massive overvaluation of the "ape ecosystem" in late April 2022 in a post called "Insanity of the Apes." At the time, the market cap of the original BAYC was $4.3 billion based on a 147 Ethereum (ETH-USD) floor price per NFT - that floor price is now just 64.44 ETH.
At a $1,290 ETH price, the 10,000 ape pictures now have a collection market cap of $832 million. Meaning the BAYC collection has collapsed 80% in value since that subscriber-only article. Interestingly, ApeCoin (APE-USD), the official currency of the ape ecosystem has actually held up better and is up substantially since the FTX-induced crypto collapse from early November:
ApeCoin is now up nearly 50% from the depths of the crypto selloff caused by the collapses of FTX (FTT-USD) and Alameda Research earlier this month. ApeCoin is now beating both Ethereum and Bitcoin (BTC-USD) over the last several weeks.
The biggest catalyst that ApeCoin currently has is the activation of ApeCoin staking. The ability to stake APE is something that Horizon (ZEN-USD) developer Horizon Labs has been working on. While previous target dates have been pushed back, Horizon Labs has announced December 5th for the launch of apestake.io with reward accrual to begin on December 12th. According to Horizon Labs, there are four different staking pools that will allow ape ecosystem participants to get returns on their staked assets:
The staked assets and token allocations vary by pool. But the lowest barrier to entry for Ape staking is simply with the APE token where there is no minimum threshold for staking rewards. In anticipation of the ability to stake assets, the amount of total holders of APE has increased from a little under 91k at the beginning of October to over 103k now:
At least some of that November spike in token holders is likely attributable to the movement toward taking assets out of centralized exchanges that has been broadly felt throughout crypto, but there is no denying the trend in APE token holders has been positive even before the FTX blowup.
Like just about any staking asset in the cryptocurrency space, users who wish to stake their coins can engage directly with the smart contracts if they are technically savvy enough. This is generally not how people typically stake assets, however, as developers usually provide front-end applications that allow DeFi users to engage with the contracts with much less effort. This will not necessarily be the case for ApeCoin initially depending on which jurisdiction the user is in.
In its pre-launch summary, Horizon Labs indicated that it will be geo-blocking several countries from interacting with apestake.io, including the United States and Canada.
We are aware that geoblocking some users in North America is inconvenient for many members of the ApeCoin community. Unfortunately, in today’s regulatory environment, we had no good alternative
Given Horizon Labs' presence in the crypto community elsewhere, this action may not be because of fears of crypto regulation broadly. It is possibly more out of an abundance of caution with the Ape ecosystem and APE specifically. The SEC is probing BAYC creators Yuga Labs and APE distribution is reportedly part of that investigation. This alone should give investors pause when entertaining the idea of buying ApeCoin. But even if the SEC probe wasn't a factor, there is still a lot I don't like about APE as an investment today.
We've seen other instances of coins under SEC scrutiny not getting listed on the major exchanges, Ripple (XRP-USD) being the best example. That said, just because something may face SEC scrutiny doesn't mean it's a terrible investment if it has value in other jurisdictions. Still though, I can't get behind buying APE today given the level of coin dilution that is still scheduled through 2025.
There are still just 361 million of the 1 billion APE coin supply in circulation. At just 36% circulating supply, APE still has a very high level of inflation remaining before the max supply is met.
|Market Cap Rank||Creator Coin||Circulating Supply|
|44||THETA Network (THETA-USD)||100%|
|49||The Sandbox (SAND-USD)||50%|
|84||Basic Attention Token (BAT-USD)||100%|
It's true that APE was just released this year, but that is one of the lowest circulating supply levels of the top creator coins in the entire crypto market.
Furthermore, ApeCoin is supposed to serve as a payment coin in the ape ecosystem, yet the weekly active users of the coin have been steadily declining over the last several months and haven't sniffed the peak from the coin's launch.
I think there are too many other coins that are more interesting in this market to justify going long APE given the obvious regulatory concerns, the low engagement with the coin, and the high remaining level of dilution. I think the surge in token holders can probably be linked to the expectation of staking rewards. The problem is there are many who have likely bought the coin to generate those rewards who will not be able to interact with the developer's staking interface because of geo-blocking in the U.S., Canada, and other countries.
To be fair, other developers who are not associated with Horizon Labs or ApeCoin can also create a front-end solution that will enable APE staking in the U.S. and elsewhere, but Horizon Labs is clearly avoiding the market for a reason. Because of that, I think it would be wise to avoid going through other actors to facilitate staking APE token. There may come a time when Yuga Labs and the ape ecosystem have the all-clear from regulators to continue building what they're attempting to build. At that time, APE might become more interesting if the ape ecosystem can maintain interest beyond crypto winter. You can read my previous ApeCoin article from May if you would like more insight into the ecosystem. But until we have regulatory clarity, I personally am not touching APE. While I would definitely not short it, I think holders would be wise to swap out.
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This article was written by
5 years as a media research analyst. Mainly covering crypto, metal, and media equities. Operator of Heretic Speculator newsletter where I share additional thoughts on finance with more of a social backdrop.
Disclosure: I/we have a beneficial long position in the shares of ETH-USD, BTC-USD, CHZ-USD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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