One Year On: Inside ApeChain’s Brief Rise and Slow Fall

ApeChain, the Yuga Labs-backed Layer 3 network for the ApeCoin ecosystem, celebrated its first anniversary last month. While it initially saw a rise in on-chain value and activity, the network has largely been in decline, along with its native token ApeCoin (APE), which has struggled to reach its NFT-era highs. Launched at ApeFest in Hong Kong on October 20, 2022, ApeChain promised features such as fast transactions, NFT staking, and diverse utility cases for APE. However, those promises have not been fully realized.

At launch, ApeChain received significant support from an initiative called “Banana Bill”, which allocated over 100 million APE tokens to incentivize developers and applications. This effort briefly boosted the total value locked (TVL) in the network, reaching a peak of $33.8 million in December 2024, according to DefiLlama data. However, TVL has since experienced a steady decline, dropping as low as $6.7 million at the time of writing. Among the 30 protocols on ApeChain, only three are generating revenue, and two of those recorded less than $100 in revenue in the past 24 hours.

The APE token was launched in March 2022 with allocations to the ApeCoin DAO treasury, launch contributors, founders, and Yuga Labs. By ApeChain’s debut, over 495 million APE tokens had already been unlocked for the DAO’s Ecosystem Fund, while founders held approximately 42.22 million, and contributors held 115.2 million tokens. At launch, ApeCoin was priced around $0.87, giving it a market cap of $628.8 million. However, one year later, the APE price dropped over 50% with a market cap nearing $325 million. Meanwhile, the unlocked token amounts increased across all allocations, reflecting broader challenges and distribution shifts.

According to Nicolas Lallement, co-founder of NFT analytics site NFT Price Floor, several factors contribute to ApeChain's declining TVL, including token unlocks, diminishing hype, and a sluggish NFT market. Lallement explained that broader crypto markets follow power law dynamics, where a few dominant players capture most of the value. For example, Aave represents over 80% of Ethereum’s lending market, and similar consolidation trends are evident in L2 solutions like Base and Arbitrum. ApeChain’s decline is part of this larger pattern of capital concentration.

ApeChain’s governance structure has also posed challenges. Lallement noted that operating as a DAO in its early stages was suboptimal since most DAOs struggle with efficient execution. A proposal in June suggested transitioning governance from ApeCoin DAO to ApeCo, an entity created by Yuga Labs. The goal was to enhance the Ape ecosystem by supporting high-quality builders and reinforcing key pillars such as ApeChain, Bored Ape Yacht Club (BAYC), and Otherside. This transition was supported by 99.66% of voters, despite the increased centralization.

Bored Ape Yacht Club (BAYC), Yuga Labs’ flagship NFT collection, remains the second-largest NFT collection, maintaining a market capitalization of 58,990 ETH (over $206 million). Despite its prominence, BAYC’s price floor has declined in recent months, now standing at 5.9 ETH. Yuga Labs has strategically refocused, selling off non-core assets like CryptoPunks and Meebits to concentrate on its original IP and metaverse ambitions. Lallement suggested that a strong market recovery could reignite interest, though this remains uncertain given current conditions.

Despite efforts to reposition itself, ApeChain’s challenges persist. The broader NFT market remains weak, with sales volumes down over 44% in the past month, and ETH trading below $4,000. Regulatory uncertainty around ApeCoin and BAYC diminished in March when the SEC ended its investigation without enforcement actions. However, this did little to boost the ecosystem’s performance. Yuga Labs’ long-term focus on onboarding new users and maintaining NFT accessibility could play a pivotal role in crafting the future of ApeChain and its surroundings, though the path forward remains steep.