As of press time, 70.17% of voters supported the proposal, 10.26% of members agreed to reduce inflation gradually rather than radically, and 19.57% of members rejected both models.
Decentralized exchange (DEX) PancakeSwap’s governance token CAKE suffered a heavy blow this week. Data show that CAKE has plummeted 24.4% in the past seven days, becoming one of the worst-performing tokens among the top 100 crypto assets by market capitalization.
PancakeSwap is a DEX built on BNB Chain. It is the leading DEX in the ecosystem, with a total lock-up value (TVL) of nearly US$2.3 billion. Earlier this month, PancakeSwap V3, the third iteration of the project, was deployed and Extension kits coming to Aptos and Ethereum.
Token Economics “Overhaul”
The PancakeSwap community recently announced its new CAKE Tokenomics v2.5 decision-making proposal, which is currently being voted on. The voting will end at 23:30 Beijing time on Friday. The proposal focuses on reducing staking inflation and reforming real yields, thereby protecting the interests of long-term CAKE stakers.
CAKE’s emission rate has been a key concern for PancakeSwap core community members for some time. High inflation is considered unsustainable because it relies on a steady flow of new money inflows. Additionally, it does not benefit long-term holders of CAKE. For the long-term health of PancakeSwap, the core team proposes to reduce the token’s inflation rate from the current over 20% to 3-5%.
The community proposed two options: radical reduction (option 1) or gradual reduction (option 2). If option 1 is approved, the network will immediately adjust the CAKE Syrup Pool emissions from 6.65 CAKE/block to 3 CAKE/block. Thereafter, the reduction will be 0.5 CAKE/block per month for five months; on the other hand, if option 2 is passed, CAKE will adjust the CAKE Syrup pool discharge from 6.65 CAKE/block to 4.5 CAKE/block.
Simply put, if the proposal is passed, it will reduce the number of tokens available to project stakeholders, push CAKE into a deflationary model, and CAKE "emissions" on PancakeSwap's main liquidity pool Syrup Pools will drop by 94%.
Cake DeFi CEO Julian Hosp commented: “We are seeing yields adjusting to healthy, realistic levels, albeit much lower. We think this is actually a good sign, as it shows that the industry is moving towards what we believe It’s a real step forward in DeFi.”
Competition on the DEX track is fierce
DappRadar data shows that Uniswap is the only decentralized exchange with more transaction volume than PancakeSwap. It expanded its suite to BNB Chain in March, but PancakeSwap still dominates its home court, processing more than 200 times the transaction volume of Uniswap in the past week. .
There are other projects also competing for market share on the BNB Chain. The trading volume of the decentralized perpetual contract exchange Levels increased by 37.6% this week, ranking second among all exchanges on the chain. Another decentralized The trading volume of chemical exchange Thena increased by 54.4% this week, ranking fourth among BNB Chain.
Loss of pledges, CAKE price plummets
While lowering inflation will improve token economics by slowing CAKE supply, the decline in staking rewards has caused an exodus of stakers, and reduced block rewards mean less revenue for new stakers, which may ultimately lead to less funds flowing to PancakeSwap. This resulted in a decline in platform revenue.
DefiLlama data shows that the amount of pledged CAKE has dropped almost simultaneously with the price of the CAKE token. Since the team first proposed the token economics change on April 19, the pledged amount has decreased from 1.007 billion CAKE to 677.851 million CAKE 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 obtain CAKE rewards. The longer the user locks, the higher the reward.
The trader said that approximately 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) were locked in the Syrup Pool. Additional unlocks are expected in the coming weeks, which will create selling pressure on CAKE.
However, some indicators point to the possibility of a trend reversal. According to CryptoQuant, CAKE’s relative strength index (RSI) was oversold at press time. This creates pressure to buy.
CAKE's market value to realized cap (RV) ratio has also dropped significantly, which may be a sign of a market bottom.
At press time, CAKE was trading at $2.67. 0x GeeGee said that he does not plan to buy on dips for the time being: "This cycle I started buying CAKE at $0.50. If it returns to this price, I will enter again."
Technical analyst BlockchainSanta explained in his tweet that the CAKE price is close to its buy zone, setting the buy price of the CAKE token at $2.5. The expert recommends opening long top positions on CAKE as the token is expected to gain momentum in the near future. has recovered from the decline and set the nearest resistance at $3.2, but a break below the support at $2.5 may invalidate the bullish thesis and cause a further downward correction.
