ApeCoin ($APE), a cryptocurrency launched by the creator of one of the largest non-fungible tokens (NFTs), peaked 5 minutes into its first day of trading before falling as much 80% then fluctuating between $6 and $8 for the rest of Thursday afternoon.
The coin is changing hands on major crypto exchanges for $8.39 apiece, down from $39.40 in early morning trading according to Coinbase. Introduced by Bored Ape Yacht Club (BAYC) creator, Yuga Labs, the token is intended to be a currency used for future gaming and entertainment applications.
Its launch is a boon for Bored Ape Yacht Club owners who got tokens before others, but retail buyers may not be so lucky, one expert warned. As crypto trading is generally volatile and the NFT market shows signs of cooling, the debut can be common for new ERC-tokens with little to no trading liquidity where trading bots can front run order books forcing retail investors to buy the token at inflated prices.
“It will be interesting to see if [ApeCoin] picks up any traction once the immediate volatility and sell-off is over,” the Rug Doctor, the pseudonymous founder and CEO of the startup crypto rating firm, RugDocIO, told Yahoo Finance.
Yuga Labs capitalized on last year’s boom in NFTs, which act as certificates of authenticity and are minted and preserved on a blockchain. They serve as the receipt for digital goods, including videos, music, million-dollar fine art, and digital real estate.
By the end of 2021, investors spent close to $41 billion on NFTs with one of the most popular segments being tokens that can serve as social media profile pictures.
In that period, BAYC broke NFT records by offering unique community perks such as merchandise and invitations to live members-only events alongside their NFTs and counting such celebrities as Snoop Dog, Serena Williams, Paris Hilton, Jimmy Fallon, and Mark Cuban among their members.
But since peaking January 31, the number of unique buyers and sellers in the NFT market has compressed. Less than 7,000 unique NFT sellers are actively participating in the market, according to NFT data provider, Nonfungible, or two-thirds what it was two months ago at 21,296.
Adding to the market pressure is the Securities and Exchange Commission, which is scrutinizing platforms that sell NFTs, questioning if these assets could be considered an investment contract.
Despite those headwinds, Yuga Labs is forging ahead. On Friday, the company announced it had acquired Crypto Punks and Meebits, two other highly valuable NFT collections. As of the beginning of February, there were reports it was in financing talks with Silicon Valley venture firm, Andressen Horowitz (a16z), that would set up Yuga Labs for a $5 billion valuation.
For ApeCoin’s debut, owners of NFTs created by Yuga Labs could claim amounts of the new coin on Thursday morning based on the particular NFT collection they own. BAYC owners received the most at 10,094 tokens each.
The token is managed through ApeDAO, a decentralized autonomous organization (DAO). The measure according to Antoni Trenchev co-founder and managing partner of digital asset platform, Nexo, means “ApeCoin won’t be under fire from the SEC about being a security.”
The company’s IP acquisitions in addition to APE “proves that Yuga Labs is pushing new ground even when the market’s excitement has waned,” Joseph Maresca, a BAYC NFT owner and promoter who bought his ape NFT almost a year ago, told Yahoo Money. “Many in the NFT community said BoredApes are dead but we have roared back.”
Since ApeCoin’s debut, Maresca is trying to organize an Ask Me Anything event over social media with the firm’s founders to “rally the BAYC community to the cause,” he said.
“We could discuss what you guys are working on (that you are ok with talking about) and maybe allude to some major announcement down the road,” Maresca wrote in an email to Yuga Labs.
While bot attacks won’t prove as influential once the coin gets more liquidity, unaffiliated crypto investors are more skeptical. The allocation of ApeCoin arguably gives venture capital firms and BAYC NFT holders a sizable advantage over retail investors, with 15% of the token’s supply going to prior NFT holders.
“The dynamic lowers the tokens liquidity, which can make it far more volatile in the near term, which isn’t a problem for well-positioned BAYC holders who essentially received the tokens for free,” the “Rug Doctor,” the pseudonymous founder and CEO of the startup crypto rating firm, RugDocIO, told Yahoo Finance. “But it could seriously hurt retail investors thinking of buying in today.”
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.
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