The Defiant

Bored Ape NFTs Hit 18-Month Low

Most Valuable NFT Ecosystem Deals With Unprecedented Challenges As Hype Wears Off

By: Owen Fernau Loading...

Bored Ape NFTs Hit 18-Month Low

As the poster child of the NFT market, the ongoing selloff in Bored Ape Yacht Club NFTs and associated digital assets has the community looking for ways to drive value to the assets in a bear market.

ApeCoin, the token billed as the linchpin of the world’s most valuable NFT ecosystem, hit an all-time low of $1.93 on June 19, down 93% from its all-time high, before rebounding last week.

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APE Price, 30 days

Bored Ape Yacht Club ( BAYC), the ecosystem’s flagship NFT collection, is also down to a 37 ETH price floor, a level last seen in November 2021. That represents an 83% decline from BAYC’s all-time high in dollar terms of $435,000.

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BAYC Floor Price

The bearish price action adds a sense of urgency to an ongoing election for the Special Council, who are paid members of the decentralized organization ( DAO) tasked with stewarding the ecosystem’s growth.

Exorbitant Salaries

A post by Vulkan, the pseudonymous secretary of ApeCoin DAO, showing that council members have been raking in over $20,000 on a monthly basis, brought extra scrutiny to the election.

“How many of these peeps suddenly decided to run for ApeCoin DAO membership after seeing those salaries,” said OKHotshot, a well-known analyst in the space.

A community member has since posted a proposal to halve the Special Council’s salaries.

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ApeCoin DAO Organizational Chart

Past members have included Alexis Ohanian, the co-founder of Reddit, and Yat Siu, founder of Animoca Brands, the multibillion-dollar web3 powerhouse. The new members of the Special Council will take on the role in July.

‘Energy Needs To Turn Up’

With prices down, the community as a whole is looking to reignite the spark which pushed BAYC NFTs to be worth over $400,000 apiece as recently as April 2022. Illya Fraser, a music producer who works as community and partnerships lead at Yuga Labs, the billion-dollar company behind BAYC, exemplified the sentiment on a Twitter Space.

“At the end of the day, I'm in agreeance with all y'all that energy needs to turn up,” Fraser said in a Twitter Space called “Is Yuga Okay” earlier this week.

The Bored Ape ecosystem has arguably been the most impactful collection of NFTs to date. Now the ApeCoin DAO and community are dealing with extended downward price action for the first time, and the question of whether the DAO will serve as an example to emulate, or a cautionary tale of failure, hangs in the balance.

Seeking Clarity

There are clear struggles.

The DAO only just voted to start working on a mission statement this month, over a year after ApeCoin launched along with the massive airdrop of the APE token. The DAO also voted in June to establish “working groups,” which will be responsible for different subsets of the organization’s responsibilities, like marketing, metaverse efforts, and governance.

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The ApeCoin DAO is similar to many projects in the crypto space — it’s not clear who is responsible for what. There’s Yuga Labs, the company which launched Bored Apes NFTs which raised money at a $4B valuation in March 2022. And then there’s the ApeCoin DAO that controls a $1B treasury of its own.

The incentives between the two organizations are relatively aligned — Yuga Labs allocated itself a time-locked 15% of the total 1B APE tokens, worth over $300M at the time of writing. So what the ApeCoin DAO does to drive value to APE does matter to Yuga.

Yuga has only just started receiving its APE tokens in March, after a 12-month vesting period.

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Yuga Labs' allocation of APE in yellow

The company doesn’t provide a press email on their website, and ApeCoin DAO didn’t respond to an email from The Defiant.

Royalties Pour In

Yuga has also earned well over $100M from royalties which accrue when its NFTs change hands. Sara Gherghelas, an analyst at data provider DappRadar, called Yuga’s royalties a “perfect business model” in an interview with The Defiant.

Despite the price action, the Bored Ape ecosystem is still a clear juggernaut in the NFT space — Gherghelas penned a report which found that Yuga Labs’ NFTs, 16 collections in total, accounted for 34.5% of the total NFT trading volume in the last quarter of 2022 and the first quarter of 2023.

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Given the money coming in from investors, royalties, and APE unlocks, Gherghelas is optimistic about Yuga Labs. “I think Yuga Labs is here to stay,” she said.

Untested Model

With regard to ApeCoin DAO, the analyst is less bullish. She did add, however, that it can take a while for best practices around how to run different types of entities to take hold. She gave the example of a limited liability company (LLC), which, while commonplace now, was an untested type of structure when it was first enacted in 1977.

Indeed, while many people hype up their potential, DAOs are still an untested way to manage a business. Even one of the most sophisticated DAOs, which stewards the major lending protocol MakerDAO, has run into serious issues.

Melissa Barrett, who holds three Bored Apes, told The Defiant she was more concerned about the downward price action of the NFTs than of APE. She didn’t cite the DAO as the reason for APE’s trajectory though. Instead, Barrett said that it was the inflationary token model and staking mechanics, a way for NFT holders to deposit their assets in order to earn additional APE, which pushed the token’s price down.

Yat Siu, who will be leaving his post as a founding member of the Apecoin Foundation, which is in charge of the administrative side of the ApeCoin DAO, told The Defiant he was impressed with the organization so far.

“Even things that have taken more time to resolve or to understand better are lessons in failure that help us improve the DAO,” Siu said over email, adding that it was “all part of the process.”

Moving forward, the ApeCoin DAO is operating in a space without real precedent. Aside from the difficulties in running any DAO, the Yuga ecosystem is loosely based around six-figure NFTs and their derivatives, which are themselves unproven in terms of staying power.

Add in a token with murky use cases, and ApeCoin DAO has its work cut out for it.

Noteworthy Exits

The ecosystem has seen some exits from notable holders as well. The address of FranklinIsBored, which once held upwards of 50 Bored Apes and contributed over $100M in trading volume, now holds none, according to a Dune dashboard by analyst hildobby.

44 holders who acquired their Bored Apes over a year ago sold them in the past seven days, according to data provider Nansen.

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Deleveraging

There have also been persistent threats of liquidation cascades — the dropping prices of Bored Apes, used as collateral in lending protocols, have pushed some users to have their loans liquidated and NFTs seized.

With two new leaders set to take the helm at the Ape Foundation, ApeCoin DAO has a chance to reset its course. Its fall has been dramatic, but partially because of the heights it came from — a historic bull market where a Bored Ape cost nearly as much as the average home in America.

“DAOs allow us to iterate on democratic principles at the pace of technology,” Siu said, adding the ApeCoin DAO has led the way in that respect. “I am proud to have been one of its founding council members and am able to transition the DAO to the hands of community elected members who I have full faith will serve in the best interests of the DAO and its community.”

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