A Look Into the Effects of the CAKE Burn Process

by BSC News

June 15, 2022


As PancakeSwap intensifies efforts on its deflationary mechanisms, the price of its token is almost back to where it started.

CAKE is Still Burning

PancakeSwap, the Decentralized Exchange (DEX) protocol on the BNB Chain, announced burning a total of 6,770,615 CAKE tokens worth $22 million.  

The Leading DeFi protocol made the announcement through Twitter on June 13 before introducing a proposal to utilize more trading fees to support CAKE buyback and burn mechanisms. Token burning occurs when the developers of a particular token remove a specified amount of the token from circulation to restrict supply, making them scarce, thus driving up the price. 

According to PancakeSwap, the end goal of burning its CAKE tokens “is to reduce net CAKE emissions,” ultimately making CAKE “emission neutral” or “deflationary.” As per its whitepaper, one of the objectives of the project is to ensure that more CAKE tokens leave circulation than the amount produced, hence regular burning. But how has this affected the performance of the token since its launch?

Never - Before - Seen Lows

With a current price of $2.81, the CAKE token now approaches the index price it traded at launch. The token marked an all-time high of $44.18 last April, but it has declined by over 90% since then.

$CAKE is currently ranked number 71 on the list of cryptocurrencies at a circulating supply of 150,666,405.95 CAKE tokens and a  market capitalization of $423.85M at the time of writing. However, since last April, the token has lodged a 92% decline in its market capitalization. 

Source: Santiment

Price movements indicate the current year has been significantly bearish for the CAKE token. The price of the token took a plunge after the bloodbath that plagued the cryptocurrency market last April and it has since been on a steady decline. The token's Relative Strength Index (RSI) has also lodged below the 50 neutral regions. 

However, increased offloading of the CAKE tokens has commenced with occasional bullish retracements, albeit short-lived. During the time of writing, the token was deeply oversold, with the RSI marking a spot at 22. The ongoing bearish run might not be over with the 50-day EMA comfortably positioned above price. 

 Source: TradingView

Furthermore, since the launch of the token, on-chain analysis revealed that on a social front, the CAKE token flourished the most in 2021. The token’s social Dominance peaked at 5.04% on July 14, 2021, but it currently stands at 1.706% at the time this article was written, declining by over 65%. Similarly, it reached a high of 3924 in Social Volume on July 23, 2021, but it now sits at 586 at press time – an 85% drop. 

Source: Santiment

Proposal to Increase Buyback and Burn Allocation

To further intensify its deflationary efforts, PancakeSwap set out a proposal on June 13 to increase the buybacks and burns allocation to 0.0575%. With the allocation currently at 0.0500%, the Protocol stated that the extra 0.0075% would come out of its treasury allocation, thereby reducing the CAKE trading fee allocation that enters the treasury from 0.03% to 0.0225%.

Source: PancakeSwap

What is PancakeSwap: 

PancakeSwap is a Decentralized Exchange (DEX) built on the BNB Chain. It offers users various features such as Liquidity Pools, Swapping, Yield Farming, Syrup Pools, Automated Market Maker, Initial Farm Offering (IFO), NFT profile system, and many others. 

PancakeSwap’s official links are available below:‍

Website | Twitter | Medium | GitHub |

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