A euphoric value rally by ApeCoin (APE) seen in mid-March seems to be exhausted already because of the coin’s 70% drop in valuation previously two weeks — and it could fall additional in April.
On the core of this bearish outlook is a rising wedge, a technical sample that varieties as the worth consolidates upward inside a variety outlined by two converging ascending trendlines.
In an ideal situation, rising wedges resolve right into a bearish breakout, confirmed by a decisive drop under the decrease trendline that sometimes takes the worth as little as the utmost wedge’s top.
ApeCoin has been portray a really related sample since March 18, as proven within the chart under. The coin not too long ago broke under its rising wedge’s decrease trendline, bringing itself in proximity with the setup’s theoretical value goal close to $9, about 30% decrease than April 1’s value.
In the meantime, a transparent divergence between rising costs and falling volumes throughout the final two weeks additionally indicated a weakening upside momentum, elevating the probabilities of a drop in direction of the wedge goal, as mentioned above.
To recap, Yuga Labs, the firm behind the popular Bored Ape Yacht Club (BAYC) NFT collection, minted 1 billion ApeCoin as the governance tokens of their new decentralized autonomous organization (DAO). Then they airdropped 10,000 APE to each BAYC NFT owner, amounting to 15% of the total supply.
Meanwhile, APE gained listing across some of the leading crypto exchanges, including FTX and Binance, on the same day, providing avenues for BAYC owners to liquidate their APE rewards instantly. As it happened, APE rose from nearly $1 to nearly $41 on its March 17 debut, but has since seen a strong correction.
Josh Ver, co-CEO of SparkWorld, a prediction platform for NFTs, noted that APE’s current valuation — still around 1,200% higher than its debut price on Binance — is a result of the “hype, excitement and exuberance” around Yuga Labs’ success as a “blue-chip” startup.
“Yuga Labs, the studio behind the collection, are a commercially viable business; last year, they saw over $127 million in revenue,” he explained, adding that “if ApeCoin holders received a share of these profits, then APE would hold considerable fundamental value.”
But Ben Lilly, a token economist at Jarvis Labs, raised concerns about ApeCoin’s inflationary model, which could weigh its valuation down in the future.
He said that 9.4 million APE would likely enter the market each month over the next year as Yuga Labs, the four BAYC Founders, and will be able to unlock their allocated tokens.
“This implies a need for about $132 million of monthly demand or $4.4 million per day that needs to enter the market to soak up new supply,” Lilly wrote, adding:
“With these supply unlocks and substantial inflation in the first year, it begs the question to the market… How will Yuga Labs, BAYC, the DAO and venture firms (a16z and Animoca) generate the needed demand? Is it even possible?
Protecting APE’s value is possible
But like Ver, Lilly suggests that Yuga Labs’ brand value could protect ApeCoin from the said inflationary risks, noting that the $4-billion startup could source better technology, artists, and resources that translates to higher potential asset values later if used wisely.
Related: NFT creator Yuga Labs raises $450M, bringing company valuation to $4B
For instance, Yuga Labs has already released the teaser video of its upcoming metaverse called “Otherside” that enables the crossover of the NFT world’s most popular collections, including CryptoPunks, with the BAYC.
— Yuga Labs (@yugalabs) March 19, 2022
“In that very same line of considering it shouldn’t be a shock both if a extra accessible NFT hits the marketplace for use within the Otherside NFT metaverse,” wrote Lilly, including that it could deliver extra customers to “entry the digital world,” thus rising APE’s marketshare in tandem.
The views and opinions expressed listed below are solely these of the writer and don’t essentially mirror the views of Cointelegraph.com. Each funding and buying and selling transfer entails danger, it’s best to conduct your personal analysis when making a call.