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Metaverse and non-fungible tokens (NFTs) are more than just buzz words in the crypto sector. The NFT sector witnessed a massive growth the previous year: in 2021 alone, the market was valued at $40 billion. This sector has continued to grow this year with new NFT marketplaces getting launched. With this continued growth, what we also saw was a new coin taking the sector by storm — $APE.

Remember last year when the likes of Paris Hilton, Neymar Jr, Snoop Dogg, and many other celebrities purchased from Bored Ape Yacht Club (BAYC), which is now one of the most popular NFTs by volume? Well, ApeCoin is the ERC-20 governance and utility token within the APE ecosystem. What this means is that every investor who bought (or will buy a BAYC NFT) would get APE tokens for free. They can cash in or sell whenever they want.

Another point to note is that ApeCoin was officially created by ApeCoin DAO and not Yuga Labs, the team behind BAYC. Why does this detail matter? Most likely for regulatory purposes. Cryptocurrencies cannot give off stockish vibes. If they do, then most likely the Securities and Exchange Commission (SEC) will come down hard on the token and the company (just like they did with Ripple). We will come back to this point a little later.

Tokenomics and its use case

There are 1 billion APE coins in total and 15% of the token supply is allocated to NFT holders. Additionally, 47% of the total supply will be granted to the DAO treasury, with the amount vesting over the next 48 months.

Additionally, Yuga Labs will receive 15%, the founding members of Yuga Labs will receive another 8%, and 14% will be allocated to early contributors to the APECOIN project. Of course, retail traders who didn’t get a free APE because they weren’t holding any BAYC NFT can buy the coin on exchanges.

While APE holders ponder when to sell, we need to keep in mind that it serves as a governance token as well. This means that ApeCoin holders can not only vote on proposed protocol changes, but that will also determine the future of the token.

APE is now the in-game currency in Animoca Brands’ Benji Bananas. E11EVEN Residencies in Miami decided to accept APE payments. Clearly, APE will be the in-game currency for many projects that Yuga Labs will be leading. Beyond that, its use case lies in its value as a governance token as well.

Beyond its utility, one cannot ignore its volatility either.

Just days after hitting a new all-time high, the token plummeted and hit a low of $16.71 on May 2, 2022.

This was due to the launch of one of the most anticipated NFT mints, during the launch of Otherdeed for Otherside from Yuga Labs. Otherside is the metaverse being built by the parent company of Bored Ape Yacht Club. Yuga Labs had revealed that the NFT mint would cost a flat 305 APE (~$5,250); catalyzed by this news, APE was trending high the previous week.

The mint didn’t go according to plan mostly because of the massive demand for Otherdeed, which in turn resulted in high gas fees for the NFTs on Ethereum. This meant that users were paying thousands of dollars for an NFT that was less than $6,000.

Another disappointing result was that there were many victims of failed transactions. They had paid a gas fee but they didn’t get their hands on their NFT. After this fiasco, Yuga Labs requested the ApeCoin DAO to hold a vote on whether APE could migrate from Ethereum to its own blockchain.

The biggest lesson one can learn is that APE’s future is closely correlated to that of Yuga Labs, a company that’s valued at nearly $4 billion. As APE is used as the primary settlement on most of Yuga Labs’ products and services, one can assume that the future of this token is fairly optimistic given that Yuga Labs is a blue-chip company at the moment.

Remember the point about how cryptocurrencies cannot act like stocks? Well, as long as APE’s supply metrics and future are independent of Yuga Labs’, this point of contention (or close correlation between the two) should not be an issue. However, with the SEC’s case against Ripple, one cannot help but wonder how this case’s final verdict will help shape the landscape of most digital assets and their tokenomics.

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