Why You Should Think Twice Before Investing in ApeCoin
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Understanding ApeCoin's Background
For those who keep an eye on the cryptocurrency scene, the name ApeCoin has likely crossed your radar. If you're new to it, brace yourself as we delve into the less appealing aspects of this altcoin and consider why investing in it might not be the best choice.
Before we explore the drawbacks, let’s outline some key information. ApeCoin is the official token of the ApeCoin DAO, which originated from the popular Bored Ape Yacht Club NFT initiative. It launched on March 17, 2022, and can be found on nearly every major cryptocurrency exchange. Creators Yuga Labs have hinted at a metaverse game called The Otherside, where players can buy, own, and trade virtual land, akin to The Sandbox. Additionally, music icons Snoop Dogg and Wiz Khalifa have released tracks exclusively for ApeCoin holders, and TIME magazine plans to accept the token for subscriptions.
Given its affiliation with the lucrative Bored Ape Yacht Club, there seems to be a compelling reason to support this new altcoin. However, a closer examination reveals concerning aspects of ApeCoin and its governance structure.
Decoding the DAO
DAO, or Decentralized Autonomous Organization, represents the future of business operations on the blockchain. Most DAOs enable member voting rights and a profit-sharing framework. However, on the official ApeCoin website, the benefits associated with owning ApeCoin appear ambiguous, raising suspicions about the creators' true intentions—perhaps to capitalize on their established fanbase?
To help serious investors make informed decisions, here are four reasons to approach ApeCoin with caution.
Issues with ApeCoin's Distribution Model
The roadmap for the ApeCoin DAO fails to clarify how profits will be shared with token holders or if Yuga Labs’ earnings will benefit DAO members. What it does specify is a distribution structure that seemingly favors insiders and current BAYC NFT holders. If you're not among the founders, a venture capitalist, or an owner of a Bored Ape NFT, the chances of benefiting are slim. As a holder of ApeCoin, you might never see any profit-sharing in your lifetime.
Limited Influence for Ordinary Investors
The DAO operates on a simple principle: each token represents one vote. If you own just one ApeCoin, you are a member and can vote, but the power dynamics are skewed. A billion tokens were distributed to Yuga Labs’ founders and their backers via an airdrop. With a total supply of one trillion tokens, this means that founders and VCs hold a mere 0.36% of the total circulation. However, they can leverage their billion votes to influence critical decisions, particularly when it comes to proposals about profit distribution that would benefit all members.
Administrative Costs Take Priority
The structure of the ApeCoin DAO mandates that any expenses incurred by the Ape Foundation—responsible for managing the DAO's daily operations—be settled first. Should the Foundation overspend on marketing or partnerships, the remaining funds will be distributed according to the current reward structure. Given that the creators of ApeCoin are new to crypto and financial management, there's a risk they could mismanage their budget, leaving token holders in the dark about potential embezzlement.
An Experimental Cryptocurrency
Coinbase, a leading cryptocurrency exchange, has flagged ApeCoin with an "experimental" disclaimer, meaning buyers must acknowledge the risks involved. This classification indicates that ApeCoin is an untested, speculative altcoin. The team behind it is still exploring how to utilize blockchain technology beyond the NFT realm, which raises red flags.
The Bottom Line
Ultimately, ApeCoin appears to be a precarious investment opportunity. The design of the DAO does not seem to cater to investor profit; rather, it aims to bolster the Bored Ape brand while enriching its creators. The primary intention behind the DAO appears to be capital generation for future projects like The Otherside. If these initiatives fail, ApeCoin investors may find themselves out of luck.
Adopting a long-term investment mindset in the hope of securing a share of the project's profits could be a risky strategy. A more viable approach would be to buy low and sell high, profiting from those who are caught up in the excitement. However, with the initial price surge to $40 followed by a drop to the $10–13 range, the hype seems to have diminished.
In essence, ApeCoin resembles meme coins such as Dogecoin or Shiba Inu, simply backed by the Bored Ape Yacht Club brand.
Chapter 2: A Closer Look at ApeCoin's Future Risks
In this video, we analyze whether ApeCoin is a sound investment or a risky choice.
This review examines the potential growth of Apecoin (APE) and whether it could reach $10 soon.
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