- ApeCoin (APE-USD) aims to bring decentralized ecosystems to a whole new level.
- While it sounds great on paper, decentralization inherently risks absolute chaos.
- You should trade APE-USD on the greater fool theory, not on making fools greater.
Achieving a cult following among alternative cryptocurrency fans since its inception, ApeCoin (APE-USD), for all its meme-ish qualities, represents an evolution in the blockchain space. However, the question for prospective investors is whether the evolution will be profitable. Plenty of crypto ideas have sprouted over the years — both centralized and decentralized ones — yet a compelling proposal alone is no guarantee of success.
Even on a technical basis (and by that, I’m referring to the discipline of technical analysis), ApeCoin cuts an ambiguous profile. Unlike other cryptos on the evening of March 25 — the time of writing — APE happens to be printing red ink over the trailing 24 hours and the past seven days. At a time when the broader virtual currency sector is feeling optimistic, this contrast is somewhat disconcerting.
Still, prospective speculators may be able to win out with ApeCoin on the “greater fool theory.” That is, the concept that so long as the hype train keeps running, you will be able to sell your holdings to another person, irrespective of the true underlying value. But even fools won’t buy when there are clear signs of trouble, making APE-USD a rather risky proposition.
| APE-USD | ApeCoin | $13.74 |
What Is ApeCoin?
Despite recent unrest in the crypto space, stemming from the coronavirus pandemic to economic woes to the geopolitical flashpoint in Eastern Europe, the number of available cryptos to buy continues to skyrocket. As of now, there are 18,470 coins and tokens that can be added to your portfolio. Presumably, there will be many more in the months ahead.
Therefore, you got to start with the basics. Just what is ApeCoin? And more importantly, what distinguishes APE-USD from the litany of other cryptos?
To answer the first inquiry, ApeCoin is a digital token that undergirds the APE Ecosystem, a decentralized community that purportedly stands at the “forefront of Web 3.0.” Driving this ecosystem is the distributed nature of power and decision-making inherent in decentralized autonomous organizations or DAOs.
What’s a DAO? Simply, it’s an entity with no centralized authority. Rather than a single administrative body dictating terms and conditions, all decisions are made through a consensus of the target ecosystem’s stakeholders. Since ApeCoin (or any other community) stakeholders can be located throughout the world, administration is distributed.
In theory, projects like ApeCoin are profound in the potential that they deliver. We’re all seeing now the consequences of the extremities of centralization, where one person flushed with power can disrupt the entire global order. Presumably, decentralized distributed administration can radically shift the “analog” paradigm.
DAOs and the Risk of Chaos
Although the concept of ApeCoin specifically and DAOs broadly enjoy significant relevance — especially these days — you don’t want to dive in without conducting serious due diligence.
For starters, let’s discuss the second question from above: what makes ApeCoin different from other cryptos tied to similar DAOs? Frankly, it’s difficult to say other than ApeCoin commands a level of popularity that may be difficult for other blockchain-based communities to usurp.
While I might draw heat for that opinion, here’s the harsh reality: with the total number of cryptos nearing 19,000, it’s very doubtful that ApeCoin owns the magic formula that no one else has. In my opinion — and that’s all this is, an opinion — the magic formula is the brand.
There’s nothing wrong with that but the crypto market can be fickle. A new “thang” can pop up and that might be the end of ApeCoin. Who knows?
Fundamentally, though, every DAO may eventually run into a serious long-term obstacle: decentralized authority can be utterly chaotic.
I encourage everyone that has any inkling of interest in cryptos to read Nexo co-founder Antoni Trenchev’s thoughts on DAOs. To very loosely summarize, Trenchev argues that decentralized consensus models alone cannot address the breadth of information necessary to be analyzed in order to make the best decision in a dynamic circumstance.
I genuinely believe that thoughtful investors will find Trenchev’s arguments enlightening.
A Near-Term Bet But Longer-Term Ambiguities
In the immediate frame, if I were in the market for speculation, a bet on ApeCoin wouldn’t be a bad idea. It carries significant pull among crypto fans. As Shiba Inu (SHIB-USD) and other meme-ish cryptos demonstrated, sometimes pull is all you need to accrue massive profits.
Therefore, I do believe in the greater fool theory. At this juncture, there will likely be someone to buy your stake in APE-USD.
But as a longer-term investment? I have questions — indeed, I’d say that I have nearly 18,000 of them. With competition so fierce, ApeCoin might not have the moat necessary to stay relevant indefinitely. As well, the viability of DAOs is no guarantee either, which necessitates watching APE-USD like a hawk if you decide to participate for more than a short-term gamble.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
