ApeCoin has dropped by 70% + since the release of Otherside - Can Yuga Labs turn the ship around?

ApeCoin has dropped by 70% + since the release of Otherside – Can Yuga Labs turn the ship around? – Mail Bonus

ApeCoin (APE), the new cryptocurrency recently launched by Yuga Labs, aims to be the foundation of the Otherside metaverse and recently the symbol has experienced a huge volatility leading to and after the sale of digital land. APE prices fell from $ 26 on April 28 to $ 14 in May. 2 – more than 45% reduction within a few days from mint. The price has now dropped to the $ 6 range.

Given current fluctuations, investors will wonder whether ApeCoin prices will ever pick up in the previous trading range. Let’s first look at historical price developments, especially what happened on Otherdeed Currency Day; then dive deeper into the amount of APE that will be locked and released over the next three years. This will provide a better understanding of the supply and demand dynamics that could affect prices in the future.

ApeCoin rose after the Otherdeed announcement

In the first two days of APE listing on March 17, 2022, the price rose from approximately $ 7 to $ 17 at its peak; increase by 143%! The price had then fluctuated between $ 10 and $ 15 until rumors began to circulate about the Otherside metaverse land sale.

APE historical hourly rate from the beginning. Source: CoinGecko

The chart above shows that the APE rose sharply by almost 24% in one day from $ 13.16 to $ 16.30. When the Otherdeed rumors hit Twitter on April 20, APE went up to $ 26 on April 28 after the sale was officially confirmed by OthersideMeta two days earlier.

MAYC & BAYC average price, volume of advance currency. Source: OpenSea

The prices of the Bored Ape Yacht Club (BAYC) and the Mutant Ape Yacht Club (MAYC) rigid symbol (NFT) also followed a similar pattern on April 20th. MAYC reached an all-time high of 43 Ether (ETH) on April 26, the day the sale was confirmed, and BAYC began moving back from its 105 ETH low to a new high of 168 ETH on May 1st.

There was confusion when Yuga confused users during the Otherdeed sale

Otherdeed was seen as an opportunity for new investors who have been priced from BAYC, MAYC and BAKC to become part of the Ape community.

The constant conviction towards the APE was driven by the fact that it is the only currency in the Otherside metaverse and the secondary sales in the secondary market would also be traded with the APE as well as the ETH.

Investors who believed in Yuga Labs and the idea behind Otherside metaverse rushed to buy APE in preparation for the coin at a price of 305 APEs per plot. In general, increased demand for APE was expected as the day of slaughter approached and there was also a foreseeable increase in the price of mint.

What came as a shock later is how chaotic the whole process of beating Otherdeeds was chaotic. APE prices fell from $ 24 to $ 14 on May 2, reflecting more than a 40% drop in two days! An immediate drop in price to $ 20 on a currency day could be explained by a sudden drop in demand for APE after the currency began.

A further 30% reduction over the next two days is a clear reflection of investors’ losses on the project after the currency crash. BAYC’s and MAYC’s prices reflected the same attitude by lowering more than the otherdeed market value of Otherdeed.

Despite attempts by the Otherside team to verify new investors through the Know Your Customer (KYC) process for the currency and offer the sale at a fixed price, these measures were not sufficient to prevent a gas war. The information was not clear and sometimes outright wrong before the coin was struck, and significant sums of money have been incorrectly spent and burned on petrol due to poor communication between Yuga Labs.

The following are some of the major problems that investors have encountered on Mint Day.

What happened to the Dutch auction?

On April 26, OthersideMeta tweeted that the coin would be a Dutch auction, but three days later changed their minds and said “Dutch auctions are really bullshit,” a complete twist and a brutal slap in the face to investors.

A Dutch auction would have been an effective way to reduce gas wars due to its unique design with very high starting prices and falling prices over time. Investors could have chosen to mint at the price they could afford at different times, avoiding hitting everyone at the same time, at the same price and creating a gas war.

Delaying the currency created further problems

Following the team delayed At the currency date, APE prices experienced some of the biggest hourly down pricing.

The hourly chart below shows that the APE increased slightly in the first three hours after the originally estimated currency period, then decreased from $ 22 all the way to $ 18 when the actual mowing took place at 21:00 EST (1:00 UTC).

It is difficult to say whether the delay has increased the pressure to reduce, but the price fluctuation in the APE significantly increased the risk taken by investors, especially when the currency was not even guaranteed for KYC’d wallet owners.

The APE price decreased by 18% from the initial currency period to the actual currency period. Source: TradingView

The guarantee coin for the KYC’d wallet disappeared

This was the biggest issue and misunderstanding in the whole minting process. Based on the Otherside article, at the beginning of the sale (wave 1) each KYC’d wallet would only be allowed to hit 2 lots. When the gas charge decreased, the limit would increase to an additional 4 NFT (wave 2). Since the number of KYC’d wallets is not disclosed to the public and there is only a fixed amount of weights to hit, it is uncertain whether all KYC’d wallets could hit at least one.

Based on a maximum of 6 weights in each wallet based on a total of 55,000 weights, to ensure that each wallet can hit at least one lot, the maximum number of KYC wallets should be 9,166.

It turned out that there were far more KYC’d wallets than this number and many investors failed to hit anything after paying a very high price for acquiring APE and experiencing stratospheric gas charges while on the coin.

Gasoline prices skyrocketed during the real currency

Waves 1 and 2 were designed to reduce the gas war by limiting the number of weights that each wallet can hit. The problem was that the total number of KYC’d wallets was too large. The number of people in a hurry to mint coins did not decrease at the same time as petrol taxes never decreased. While the first coins were sold in the secondary market for two or three times more than the cost of the coin, the demand for further coinage and the fierce gas war continued until all 55,000 plots were gone. Many users paid between 2.6 ETH and 5 ETH for gas charges during the process and many lost all of their fees due to failures in trading on the Ethereum network

Connected: ETH gas prices rise when Yuga Labs pays $ 300 million into the sale of Otherside NFT

A steady increase in supply puts pressure on APE prices

According to OthersideMeta, all APEs earned at the currency tournament will be locked for one year. This is over 16 million APEs (55,000 * 305) taken out of supply in circulation. Will this reduction in supply save the APE price? Sorry not. Based on the amount of APE that is opened and released on the market each month, there are 16 million drops in the ocean.

Looking at the amount of APE that will be opened over the next three years on a monthly basis, the majority of the supply comes from the DAO Treasury and Yuga Labs. There are also three large pumps available from participants in September 2022, March and September 2023.

APE coin monthly additional amount. Source: ApeCoin

On a cumulative basis, the initial volume of APEs opened on the launch date determines the supply ratio until May 2025, when it is reached by the DAO Treasury. At the rate of 7.3 million APEs opened per month for 48 months until 2026, the DAO Treasury allocation is the main source of additional APE inflation.

APE currency accumulated supply breakdown in% by allotted groups. Source: ApeCoin

Given that the estimated supply of APE in April 2022 is around 284 million, 16 million APEs locked in from the Otherdeed land sales are only 5.9%. Such a small amount of one-time supply decline is unlikely to have a lasting effect on the APE price, especially as supply continues to increase.

APE locked from Otherdeed vs cumulative monthly supply. Source: ApeCoin and the other side

Trading volume is the only possible savior for APE prices

In addition to the APE’s availability in circulation, the volume of transactions is also a crucial factor in determining future prices. By using the ratio of trade volume and supply to traffic (utilization ratio), one can often find a relationship with price.

The chart below uses a simple linear regression to show the correlation between APE utilization rate and price. In March 2022, when supply is relatively small, the higher the utilization rate, the lower the price. On the contrary, in April 2022, when the supply in a cycle becomes greater, the higher the utilization rate, the higher the price.

APE price versus utilization (trade volume / supply in distribution). Source: CoinGecko API

If the positive correlation between the utilization rate and the price persists while supply in circulation continues to increase gradually, the only saver of the APE price seems to be the increased volume of trading volume.

However, APE will have difficulty attracting more business following the chaotic sale of Otherdeed lots. Yuga Lab’s tweet about turning off the lights on Ethereum and building its own chain seems to have boosted investor confidence.

The consequences of this tweet are profound. Ethereum has a long, consistent track record of security and stability, designed and built by arguably the world’s most ingenious and well-established cryptographic capabilities. It’s more than a concern if Yuga Labs moves from Ethereum and people have rightly made fun of it on Twitter.

Yuga’s NFT collections get their extreme value ratings largely because they sit on Ethereum and users trust the internet to keep their highly rated NFTs. How would any migration from Ethereum take place? Would users trust a home-grown chain from Yuga Labs? No other chain has tokens that trade in prices like the blue chips that trade in Ethereum.

It would be reasonable to assume that APEs and Ape-related NFTs could significantly re-evaluate from their meteorological assessment if Yuga Labs were to follow the idea of ​​managing their own chain to host their collections. We’ve seen what happened to Axie Infinity on the Ronin chain. APE could be an uneven path ahead.

The views and opinions expressed herein are those of the authors only and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading business involves risk, you should conduct your own research when making a decision.