ApeCoin, the Ethereum-based token created for the Bored Ape Yacht Club NFT ecosystem, debuted in March to much fanfare (and significant payouts for BAYC holders). Now that some of the project’s backers are set to receive over $115 million in APE tokens as a reward, holders are wondering how that unlock will affect the token’s price.
The treasury of the ApeCoin DAO is anticipated to release 25 million APE tokens for “launch contributors” on Saturday. According to the website, these are the “companies and people that helped make this project a reality.” Six months after the March 17 launch of ApeCoin, the 25 million tokens will become available.
With over $115 million worth of tokens entering the market at the current token price of $4.61, this will increase the amount of tokens in circulation by about 8%. A total of 1 billion tokens were used to create ApeCoin, of which just over 318 million are currently in use. Four years after the launch in March, the remaining content will become available.
It is unknown who falls under the category of launch contributors. However, according to a new report from crypto industry research firm Delphi Digital, the list could include backers of Yuga Labs, the creator of the Bored Ape Yacht Club, which raised $450 million at a $4 billion valuation in March.
The research firm identified Andreessen Horowitz, Animoca Brands, and FTX Ventures as potential beneficiaries. Decrypt reached out to Yuga Labs for clarification, but did not receive an immediate response.
Yuga Labs isn’t listed as the creator of ApeCoin, presumably for regulatory reasons. The ApeCoin Foundation serves as the token’s “steward,” and it is governed by the ApeCoin DAO, or decentralized autonomous organization—basically, an online group united by a common goal with token-based membership.
It remains to be seen whether such contributors will keep their tokens or sell them on the open market, but the impact of an incoming increase in circulating supply raises concerns about how the market will react to the token unlock.
APE’s price has already dropped nearly 9% in the last 24 hours, according to CoinGecko data. It has now dropped 26% in the last 30 days.
“The million-dollar question is whether the launch contributors will sell their tokens once released. This will lead to significant sell pressure on APE,” Delphi’s authors write. “No one knows, but we can postulate that if they are long-term investors in Yuga Labs, there is a reasonable chance that they will hold on to most of the unlocked tokens.”
Given the apparent impending launch of ApeCoin staking, there may be significant incentive for launch contributors to keep their tokens.
ApeCoin holders voted in May to select Horizen Labs to build the staking system, which will reward users who stake (or hold) APE or Bored Ape/Mutant Ape NFTs within the network with token rewards. Horizen Labs recently teased development progress, with plans to host a Twitter Spaces next week to discuss the initiative’s specifics.
Teng Yan, a Delphi Digital NFT analyst, described the initial ApeCoin staking rewards as “pretty juicy,” and suggested that eligible NFT owners may purchase large amounts of APE to participate in staking. Demand for the token may drive up its price, while staking may remove significant APE liquidity from the market.
Nevertheless, Teng stated that there are still concerns about ApeCoin’s long-term utility. The token was designed to power Web3 applications such as metaverse games, such as Yuga’s upcoming Otherside experience. According to Teng, increasing utility will be required to sustain long-term demand for the token.