This one thing could be a big catalyst for ApeCoin

If you look at a chart for ApeCoin (MONKEY 4.53%), things haven’t gone anywhere near 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 is obviously a lot of risk involved in buying ApeCoin right now.

However, I am impressed by how much innovation continues to come out of the Bored Ape Yacht Club ecosystem. The creators of ApeCoin, in collaboration with the creators of the Bored Ape NFT collection, have continuously found new ways to reinvent intellectual property and new ways to extend the Bored Ape brand. And now comes another move that I believe could be a major catalyst for ApeCoin going forward: the introduction of an innovative new rewards program.

What is staking and why does it matter?

In layman’s terms, staking is simply the opportunity to earn passive income with your crypto holdings. If you have a certain crypto, you can stake it and earn rewards. You are still the owner of the crypto, but you can no longer trade it. It is “locked” for a certain period of time; at the end of the staking period you will get your original crypto back. You essentially earn rewards by letting someone else access your crypto for a short period of time.

Image source: Getty Images.

Almost all proof-of-stake blockchains offer some variation of stake rewards, and they are usually measured in terms of an annual percentage yield (APY). So you can see why stake rewards are popular among crypto investors: It’s a way to earn passive income without losing possession of the underlying crypto. If your crypto increases in value at the same time you stake it, you’re essentially double-dipping.

Monkey strike

This is exactly the type of program that ApeCoin now plans 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 of the investment proposal, but not too many details. But on September 3rd, ApeCoin officially unveiled a sneak peek of what the staking program will look like. And on September 22, ApeCoin announced that the start date for Ape Staking would be October 31. So it definitely happens.

What is absolutely fascinating about the Ape staking program is that it seems to go far 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 shown in the sneak peak from earlier this month, there will be four different staking pools – one pool for holders of ApeCoin only; one pool for holders of Bored Ape NFTs; one pool for holders of Mutant Ape NFTs; and an “interconnected” pool for holders of both ApeCoin and Bored Ape NFT.

This concept of “NFT staking” is very new, and simply brilliant. In a traditional betting program, you bet a cryptocurrency. In this new, more innovative betting program, you can bet a cryptocurrency (ApeCoin), a digital asset (a Bored Ape NFT), or both. NFTs are just tokenized assets on a blockchain, so there is the opportunity to create a new reward structure for them, including the opportunity to profit from the intellectual property of the Bored Ape ecosystem.

A new investment narrative for ApeCoin

All of this 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. When the NFT market cratered earlier this year, it put an artificial cap on how high ApeCoin could go.

But Ape staking changes all that. It transforms NFTs into earning assets. And it could remove the artificial limit 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 a lot of new demand for the coin from casual investors.

Yes, there is a huge risk associated with investing in ApeCoin. And, yes, most analysts won’t be sure to make a bullish call on ApeCoin until the NFT market turns. But I’m willing to go completely contrarian here. There is so much exciting innovation happening around Bored Apes right now, and I think the whole concept of NFT staking can 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 am positive about ApeCoin’s future.