Bored Ape Yacht Club (BAYC) might be one of the most notorious projects in the entire cryptocurrency space. The phenomenon started as an NFT project consisting of 10,000 unique pictures of cartoon-like apes on the Ethereum (ETH-USD) blockchain. “NFT” stands for “non-fungible token.” While there are 10,000 apes, none of them are identical. The ape NFTs have become so popular, that numerous well-known musicians and pop culture influencers have purchased ape NFTs and are using them as their digital identities on platforms like Twitter (TWTR).
The BAYC NFT project came from a digital asset company called Yuga Labs. What has helped catapult the BAYC project into the valuation stratosphere is the fact that Yuga Labs grants the NFT holders commercial license. That means ape holders can monetize their ape pictures with merchandise and content. We’ve already seen Ape holders use the creative license associated with the NFTs for music releases, clothing lines, and even a pop up restaurant in Los Angeles. From where I sit, the commercial usage rights of the apes is the biggest selling point of the NFTs. Not the art. Not the hype. It’s about the license and whether or not the mainstream market will accept the apes as a culturally important brand.
It has now been a little over a year since the original minting of the 10,000 BAYC NFTs and those in the community are attempting to build out an entire economic ecosystem on top of the BAYC project. Most of that economic activity has been from the sales of more NFTs. There are now complementary NFT projects like Mutant Ape Yacht Club (MAYC), Bored Ape Kennel Club (BAKC), and a video game called Otherside that is linked to yet another NFT project called Otherdeed. Otherdeed is a collection of just under 100,000 pieces of NFT property that can be used in the Otherside game. All of this background is necessary to understand the potential investment allure of ApeCoin (APE-USD).
ApeCoin
While the company has a role and a large allotment of ApeCoin tokens, Yuga Labs is not the legal entity that started ApeCoin. The coin came out of the APE Foundation and is governed by the ApeCoin DAO. “DAO” stands for decentralized autonomous organization. Holding ApeCoin provides eligibility for ApeCoin DAO membership. In addition to serving as a medium of exchange in the ape ecosystem, ApeCoin holders are also granted governance power. The ApeCoin protocol cites four use cases for ApeCoin holders:
- Governance
- Unification of spend
- Access
- Incentivization
Access and incentivization can be seen in merchandise stores, games, or services within the ecosystem that will require ApeCoin as payment for participation. This creates an environment where consumers will want to have the coin to get exclusive products. And again, commercial usage is the major selling point of the original NFT project. ApeCoin takes that a step further by adding an exclusive medium of exchange that can allow for special perks and pricing of goods and services.
Token Recipients | Distribution | Initial Lockup |
---|---|---|
Ecosystem Fund | 62% | N/A |
Yuga Labs | 16% | 12 months |
Launch Contributors | 14% | Varies |
BAYC Founders | 8% | 12 months |
Source: apecoin.com
From a coin distribution standpoint, even though Yuga Labs didn’t directly launch ApeCoin, a large portion of the coins are going to the company; though it has committed to donating 6.25% of its token distribution to charity. The Launch contributors have the most complex lockup schedule with 25,000,000 tokens coming out of lockup every six months from coin launch through the first 18 months. After the first 12 months, the dilution in the token will increase with roughly 560 million tokens coming out of lockup over the following three years.
Market & price history
Like most cryptocurrencies, ApeCoin hasn’t been immune from volatility since launch. The token was released in mid-March of this year and quickly moved from low-teens to $27 per coin. Since topping at $27 in late April, ApeCoin sold off dramatically and flirted with $5 per coin just a couple weeks ago.
Following that selloff, the coin has since stabilized a bit in the $8 dollar range. Given the lack of trading history, ApeCoin isn’t a token that I am willing to provide a technical perspective on. Like most tokens, APE will likely move with Bitcoin (BTC-USD) up or down. That said, there is an added valuation thesis given the BAYC project and the ape ecosystem are what ultimately provided expected value in the coin. Even if Bitcoin rises, if the ape NFTs are struggling, APE will probably experience sell pressure as well.
Circulating supply/holders
Though ApeCoin is clearly an extension of the popular BAYC NFT project, the biggest potential utility from the APE token itself is as a medium of exchange in the ape merchandise and content ecosystem. When assessing true comparisons, finding other tokens in the content creation space offer interesting peers. Three important metrics in assessing the real value of that network are the amount of token holders (represented below by total addresses), whether or not the token is truly decentralized (represented below by Top 100 concentration), and the amount of dilution token holders can expect going forward (represented below by circulating supply).
MC Rank | Token | Total Addresses | Top 100 Concentration | Circulating Supply |
---|---|---|---|---|
32 | APE | 74,037 | 52% | 29% |
40 | (SAND-USD) | 139,706 | 96% | 41% |
48 | (THETA-USD) | N/A | N/A | 100% |
68 | (CHZ-USD) | 142,730 | 86% | 68% |
78 | (BAT-USD) | 451,641 | 70% | 100% |
Source: CoinMarketCap, as of 5/22/22.
Despite only being released a few months ago, the total addresses figure for ApeCoin isn’t too far away from tokens with a much longer market history like Sandbox or Chiliz. Though both circulating supply and total addresses for ApeCoin are much lower than Basic Attention Token, at 52% top 100 address concentration, ApeCoin is the most decentralized of the top content creation tokens represented in the table above.
Is there a real market for ape content?
I’m not sure. To this point, it seems the people who are most likely to add value to the Ape ecosystem are the NFT holders themselves. As I wrote in April for my BlockChain Reaction subscribers, most of the quantifiable activity in the ape ecosystem has been simply from trading the NFTs as opposed to new customers outside the community buying merchandise. And importantly for the ApeCoin holders, much of that activity hasn’t required Apecoin. This is what I wrote for my subscribers in late April when the ApeCoin price was much higher:
There is an ape-based musical act called Bored Brothers that recently dropped a music NFT called “Drip” on the Sound.xyz platform. That track sold out in just a few minutes and raised roughly $89k in sales. But those 300 NFT sales of the track “Drip” were all done in ETH as opposed to Apecoin. There is a BAYC video game in the works called “Otherside.” The BAYC YouTube channel with the game’s trailer has less than 7 thousand subscribers. There is a BAYC-branded restaurant in California called “Bored & Hungry” that will only accept ETH or APE for transactions. But before you get too excited about that, Bored & Hungry is a pop-up store that is open for just 90 days. The only activity pertaining to the apes, is the trading of the apes.
Maybe the internal ape holders are enough. After all, there are now almost 35,000 unique holders of Otherdeed NFTs. The questions for those interested in the “ape ecosystem” are these: are the Apes interesting enough to garner a mainstream scale merchandise and content revenue stream outside of the closed garden that is ape-based NFTs? Or is this truly an exclusive club that will simply monetize its own fans through perpetual NFT offerings and some sort of in-game token utility? If its the latter, what is the value of that? Also, if it is indeed the latter, is ApeCoin a better investment than the ape pictures themselves?
Summary
If you believe the BAYC brand will one day produce the kind of economic value that we see from other popular content brands, then ApeCoin is a potential way to get exposure to that idea without having to spend the considerable investment currently required to own one of the BAYC NFTs directly. I really like the idea of the apes and the decentralized governance structure that the BAYC is attempting to create. It’s an incredibly interesting concept. But the prices of everything involved in that buildout seem to be completely out of control and driven purely by hype. I flat out don’t recommend any ape pictures or ape-related vehicles as investment ideas currently. There are concerns from some that the ape artwork has nefarious undertones. I also think the level of ape derivative works is concerning. Which makes me wonder if the IP has any actual value through enforceable protections at all. When you add up the BAYC, MAYC, and BAKC NFT market caps, the current combined valuation of the ape ecosystem is bafflingly higher than any realistic valuation one could assign an IP portfolio with such a small level of real world economic activity.
BlockChain Reaction
Tomorrow is the day! My Seeking Alpha marketplace BlockChain Reaction will be launching. I’ll be covering a wide variety of crypto projects, providing my Top Token Ideas, trade alerts, and broad digital asset trends. I have written about BAYC and will continue to do so in that service. Check it out! We’re offering a very nice discount for the first two weeks.