PancakeSwap (CAKE) is a top-rated decentralized exchange (DEX) that has witnessed an increase in popularity in 2021, culminating in its highest price point of $44.18 on April 30th, 2021.
Despite the negative impacts of the Terra-UST downturn, CAKE dropped to a one year low of $2.51 on June 18th last year. As of December 15th, CAKE had fallen almost 92% from its highest price, currently trading at $3.99.
CoinMarketCap’s data suggested that PanCakeSwap was the fourth most active decentralized exchange in terms of trading volume and market share. It is vying for dominance with other major DEXs such as dYdX (DYDX), Uniswap (UNI), and additional competitors.
Can PancakeSwap survive in the current economic climate and its competitive landscape? Let’s investigate.
What is PanCakeSwap and how does it work?
PancakeSwap is a decentralized exchange(DEX) built on the BNB Chain (formerly known as Binance Smart Chain) instead of Ethereum (ETH). It permits customers to exchange BEP-20 standard tokens with ease. The BEP20 token standard is similar to ERC20, which allows for the generation of tokens on the BNB network rather than Ethereum.
DEXs use intelligent contracts that allow users to trade with each other without relying on a centralized platform. Furthermore, their assets are held in wallets without the need for a third party custodian, which increases security.
In the past, a large majority of decentralized exchanges (DEXs) used order books to store data concerning all pending buy and sell orders placed on the exchange. While this is still a common practice, automated market maker (AMM) DEXs have become more popular due to their user-friendly nature and increased liquidity.
PanCakeSwap works by using automated market maker (AMM) liquidity pools that are powered by users. Instead of searching for someone to trade tokens with, individuals can deposit their tokens into the pool, which allows them to make the exchange and also earn rewards if they keep their funds in the pool.
CAKE, the native utility and governance token for PancakeSwap, has a specific purpose. What is that? The primary aim of the coin is to reward those who provide liquidity to the PancakeSwap platform.
By depositing and holding LP tokens, users are eligible to receive rewards. These LP token rewards can be used on PancakeSwap, which gives users the opportunity to amass CAKE.
PancakeSwap offers a gambling-like experience, such as wagering on whether the cost of the BNB token will go up or down within a given period.
The DEX also provides the opportunity to buy lottery tickets in order to win a large quantity of CAKE token, as well as collectible bunny-related non-fungible tokens (NFTs). Furthermore, there are initial farm offerings (IFO) available, permitting users to purchase fresh coins from new projects.
PancakeSwap launched in September 2020. The CAKE token price began at $1.37 when it was released on 29 September and plummeted to just $0.41 by 2 October, a decrease of 70% in a matter of days. It ended the year at $0.60.
In the early months of 2021, CAKE’s value saw an extreme surge due to positive market conditions and general acceptance of digital currencies. This caused PancakeSwap’s value to jump from $0.62 to a record peak of $44.18 on April 30th, representing a rise of 7,025%.
In May 2021, investors began to have a negative outlook on the market after Elon Musk tweeted about ending Bitcoin payments for Tesla cars and the Chinese government increased its regulation of cryptocurrencies.
Following the decrease in value to $12.72 on May 24th, the CAKE coin price hit its lowest point of $12.03 on July 20th. A slight rise in optimism among investors caused a surge in the token’s price to reach $26.13 by August 28th, but this was not sustained and it eventually dropped back down to $10.93 by December 14th before closing out the year at its original low of $12.03.
The crypto market has been in a negative state since the beginning of 2022 due to the breakdowns of prominent crypto projects, increasing inflation, the Russia-Ukraine conflict and concern about economic recession. As a result, the CAKE token value dropped to its lowest point in one year at $2.51 on June 18th.
As of December 15th, the market capitalization of CAKE was $584 million and it was ranked 64th in terms of size among cryptocurrencies, with a trading price of $3.70.
PanCakeSwap burn event
PanCakeSwap announced the outcome of their CAKE token burning event in December of 2022. A tweet indicated that approximately 6.95 million tokens valued at approximately £26 million were destroyed.
Data shows that 4.4% of the circulating quantity of 158.28 million CAKE tokens have been destroyed. Additionally, more than half of the token’s maximum supply (750 million) has already been burned, demonstrating the wide-reaching impact of token burning.
Token burning is done to reduce the overall amount of cryptocurrency available, which in turn increases demand. When there is high demand and a limited supply, the price of the currency will go up.
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