CAKE, the native token of the most popular decentralized exchange on the Binance Smart Chain (BSC), PancakeSwap, has spiked 15% since the project concluded to burn $73.3 million worth of its tokens on Monday. The project made the announcement on Twitter.
It’s good news for the decentralized finance (DeFi) project, its investors, anonymous team and its token, which is trading 67% down from its all-time high of $47.68 witnessed on April 30. The crypto is changing hands for around $15.58 as of the time of writing this report.
What you should know
- The CAKE token powers the PancakeSwap ecosystem, where investors can earn passive income through yield farming or staking in syrup pools. This means users can farm CAKE with liquidity or stake CAKE to receive even more CAKE.
- Today’s jump in value represents the highest single daily gain for the exchange’s token since June 23.
- PancakeSwap also said it had bought back $1.7 million worth of CAKE from the market, inclusive of trading and prediction fees.
- Token burns are not uncommon in cryptocurrency and typically function by removing a given asset from the circulating supply, thus reducing the overall supply and at times, temporarily boosting the asset’s price. This action makes the token deflationary but PancakeSwap’s developers can mint new tokens and add them to the supply.
- Asides from being a platform for staking, PancakeSwap has a decentralized exchange that allows users to trade cryptocurrency without centralized intermediaries while also keeping custody of a user’s tokens.
- On April 23, PancakeSwap was responsible for pushing the total number of transactions on the BSC to five times that of Ethereum’s where the exchange contributed more than 20% of BSC’s transactions on the day.
What to expect
PancakeSwap’s deflationary mechanisms are in full swing. A deflationary token will attract investors to the token which in turn creates demand and ultimately push the price northward. This is not the first time PancakeSwap is doing a token burn as the developers did in April when the platform upgraded its network.
The token burn in April caused the token to appreciate approximately 69% in 8 days from $26 to $44. A similar occurrence is likely to happen as the token is already bullish by over 15%.
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