If you look at a chart for ApeCoin (APE -1.50%), things have not gone nearly as planned since its much-hyped launch back in mid-March. ApeCoin is down nearly 80% from its all-time-high, the market for NFTs has cratered, and demand for Bored Ape NFTs has dried up. So there's obviously a lot of risk involved in buying ApeCoin right now.
However, I'm impressed by how much innovation continues to come out of the Bored Ape Yacht Club ecosystem. The creators of ApeCoin, working with the creators of the Bored Ape NFT collection, have continually found new ways to reinvent intellectual property and new ways to extend the Bored Ape brand. And now comes another move that I think could be a huge catalyst for ApeCoin going forward: the introduction of an innovative new staking rewards program.
What is staking and why does it matter?
In layperson's terms, staking is simply the ability to earn passive income with your crypto holdings. If you hold a particular crypto, you can stake it and earn rewards. You are still the owner of the crypto, but you can no longer trade it. It's "locked up" for a specified period of time; at the end of the staking period, you get back your original crypto. You are essentially earning rewards by letting someone else have access to your crypto for a short period of time.
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Almost all proof-of-stake blockchains offer some variant of staking rewards, and they are typically measured in terms of an annual percentage yield (APY). So you can see why staking rewards are popular with crypto investors: It's a way of making passive income without losing possession of the underlying crypto. If your crypto is going up in value at the same time as you are staking it, you are essentially double-dipping.
Ape staking
This is exactly the type of program that ApeCoin is now planning to make available to holders of the token. Back in May, the creators of ApeCoin officially approved a proposal to introduce staking to the Bored Ape Yacht Club ecosystem. Throughout the summer, there were periodic updates to the staking proposal, but not too many details. But on Sept. 3, ApeCoin officially unveiled a sneak peak of what the staking program would look like. And on Sept. 22, ApeCoin announced that the go-live date for Ape Staking would be Oct. 31. So it's definitely happening.
What is absolutely fascinating about the Ape staking program is that it appears to go well beyond traditional staking programs. In addition to being able to stake your ApeCoin, you will also be able to stake your Bored Ape NFTs. As seen in the sneak peak from earlier this month, there will be four different staking pools -- one pool for holders only of ApeCoin; one pool for holders of Bored Ape NFTs; one pool for holders of Mutant Ape NFTs; and one "paired" pool for holders of both ApeCoin and Bored Ape NFTs.
This concept of "NFT staking" is very new, and quite simply, brilliant. In a traditional staking program, you stake a cryptocurrency. In this new, more innovative staking program, you can stake a cryptocurrency (ApeCoin), a digital asset (a Bored Ape NFT), or both. NFTs are just tokenized assets on a blockchain, so there is the ability to create a new reward structure for them, including the ability to profit from the intellectual property within the Bored Ape ecosystem.
A new investment narrative for ApeCoin
This all matters so much because it could dramatically change the investment narrative for ApeCoin. The current thinking is that the price of ApeCoin is directly correlated with the overall health of the NFT market. The price of ApeCoin can only go up if the prices of NFTs go up, right? That's where we are right now. Once the NFT market cratered earlier this year, it put an artificial cap on just how high ApeCoin could go.
But Ape staking changes all that. It transforms NFTs into earning assets. And it could remove the artificial cap on how high ApeCoin can go because the creators of ApeCoin will have a new "lever" to control demand for the coin: staking rewards. Crank up the APY high enough, and you'll get plenty of new demand for the coin from casual investors.
Yes, there is tremendous risk involved with investing in ApeCoin. And, yes, most analysts won't be confident in making a bullish call on ApeCoin until the NFT market turns around. But I'm willing to go full contrarian here. There is so much exciting innovation happening around the Bored Apes right now, and I think the whole concept of NFT staking could really take off. People will be more willing to buy NFTs if they know they can earn passive income from them. For that reason, I'm bullish on the future of ApeCoin.
