CAKE fell by nearly 25% in a week, will PancakeSwap token economics be "overhauled"?
Original Author: Mary Liu
Original source: BitpushNews
Decentralized exchange (DEX) PancakeSwap governance token CAKE has been hit hard this week. Bitui terminal data shows that CAKE has plummeted 24.4% in the past 7 days, becoming one of the worst-performing tokens among the top 100 encrypted assets by market value.
Token Economics
Token Economics"overhaul"
The PancakeSwap community recently announced its new CAKE Tokenomics v2.5 decision-making proposal, which is currently being voted on and will end at 23:30 Beijing time on Friday. The proposal focuses on reducing staking inflation and reforming the real rate of return to protect the interests of long-term CAKE stakers.
The emission rate of CAKE has been a key concern of members of the PancakeSwap core community for some time. A high rate of inflation is considered unsustainable because it depends on a steady stream of new money flowing in. Plus, it doesn't benefit long-term holders of CAKE. For the long-term health of PancakeSwap, the core team proposes to reduce the inflation rate of tokens from the current over 20% to 3-5%.
The community proposed two options: aggressive reduction (option 1) or gradual reduction (option 2), if option 1 is approved, the network will immediately adjust the CAKE Syrup Pool emission from 6.65 CAKE/block to 3 CAKE/block block. Thereafter, a reduction of 0.5 CAKE/block per month for five months; on the other hand, if Option 2 is passed, CAKE will adjust the discharge of the CAKE Syrup pool from 6.65 CAKE/block to 4.5 CAKE/block.
The DEX track is fiercely competitive
According to DappRadar data, Uniswap is the only decentralized exchange with more trading volume than PancakeSwap. It expanded to BNB Chain in March, but PancakeSwap still dominates its home court, handling more than 200 times the trading volume of Uniswap in the past week.
first level title
The price of CAKE plummeted due to the loss of pledge
While reducing inflation will improve the token economy by slowing CAKE supply, the drop in staking rewards has already caused an outflow of stakers, and reducing block rewards means less rewards for new stakers, which could ultimately lead to less money flowing to PancakeSwap, This results in a decline in platform revenue.
DefiLlama data shows that the number of staked CAKEs has dropped almost at the same time as the price of CAKE tokens. Since the team first proposed token economics changes on April 19, the pledged amount has decreased from 1.007 billion CAKEs to 677.851 million CAKEs on April 27 .
Crypto trader 0x GeeGee analyzed in his tweet that CAKE fell after a large number of tokens were unlocked from the Syrup Pool mechanism this week. Syrup Pools allows users to lock tokens for up to one year to earn CAKE rewards, the longer the user locks, the higher the reward.
The trader said that about 6 million CAKE tokens were unlocked this week, accounting for only 0.08% of the token’s 750 million capped supply, and 190 million CAKE (25.3% of the supply) was locked in Syrup Pool, It is expected to be unlocked in the next few weeks, which will put selling pressure on CAKE.
However, some indicators point to the possibility of a trend reversal. According to CryptoQuant, CAKE's relative strength index (RSI) is oversold at press time. This creates buying pressure.
CAKE’s market value to Realized Cap (RV) ratio also dropped significantly, which could be a signal of a market bottom.
At press time, CAKE is trading at $2.67. 0x GeeGee said that he does not intend to buy on dips for the time being: "I started buying CAKE at $0.50 in this cycle, and if it returns to this price, I will enter again."
Technical analyst BlockchainSanta explained in his tweet that the price of CAKE is close to its buying zone, setting the buying price of CAKE token at $2.5. The downtrend recovered and set the nearest resistance at $3.2, but a break below the support at $2.5 could invalidate the bullish thesis, creating a further downside correction.
