PancakeSwap

<ul>
 <li>CAKE’s value increased by 21% due to the new proposal.</li>
 <li>A potential approval may put CAKE in pole position for a rally.</li>
</ul>
Decentralized exchange <a href="https://ambcrypto.com/search/pancakeswap" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="internal">PancakeSwap [CAKE]</a> has proposed to reduce the maximum supply of its native token from 750 million to 450 million.
According to the project, the <a href="https://forum.pancakeswap.finance/t/discussion-for-proposal-to-reduce-cake-token-total-supply/100" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="external">move</a> is necessary if the token wants to move from a high-inflation model to a more efficient one.
While the proposal would still undergo discussion, comments from the PancakeSwap forum showed that some members of the community were in support. The major reason for the backing is that the decrease in supply might trigger a jump in CAKE’s value.
<h4>Icing on the veCAKE</h4>
Furthermore, the proposal seemed to align with the launch of veCAKE.
A few weeks ago, PancakeSwap launched veCAKE, which stands for vote-escrowed CAKE. veCAKE is the non-tradable and non-transferrable version of CAKE.
During the deployment, PancakeSwap noted that the token would enable active participation in the project’s governance.
So, it is possible that veCAKE would be crucial in determining the outcome of the latest proposal. At press time, the total supply of CAKE was $236.71 million.
The result of the disclosure was a positive one for CAKE. As of this writing, the cryptocurrency’s <a href="https://coinmarketcap.com/currencies/pancakeswap/" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="external">value</a> has increased by 21.16% in the last 24 hours.
The <a href="https://ambcrypto.com/pancakeswap-surges-86-in-7-days-whats-next/" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="internal">increase</a> seemed like a much-needed one for CAKE holders. This was because, unlike its peers, CAKE’s 365-day performance was in the red. Should the proposal be approved, the tides may change for the cryptocurrency’s price action.
<div id="attachment_359916" style="width: 100%" class="wp-caption aligncenter"><a href="https://statics.ambcrypto.com/wp-content/uploads/2023/12/CAKE_1D_graph_coinmarketcap.png" data-wpel-link="internal" rel="noopener noreferrer nofollow"><img aria-describedby="caption-attachment-359916" decoding="async" class="wp-image-359916 size-full" src="https://statics.ambcrypto.com/wp-content/uploads/2023/12/CAKE_1D_graph_coinmarketcap.png" alt="CAKE 24-hour price performance" width="696" height="356" srcset="https://statics.ambcrypto.com/wp-content/uploads/2023/12/CAKE_1D_graph_coinmarketcap.png 696w, https://statics.ambcrypto.com/wp-content/uploads/2023/12/CAKE_1D_graph_coinmarketcap-300x153.png 300w" sizes="(max-width: 696px) 100vw, 696px"></a>
 Source: CoinMarketCap
</div>
Another metric that could be affected by PancakeSwap’s proposal is the Total Value Locked (TVL). The TVL measures the total amount of assets <a href="https://defillama.com/protocol/pancakeswap" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="external">locked</a> in a protocol.
When the TVL increases, it means market players perceive a protocol to be trustworthy. If the TVL decreases, it implies otherwise.
<h4>The end of the struggle may be near</h4>
At press time, PancakeSwap’s TVL was $1.47 billion, representing a 4.49% increase in the last 30 days. When compared with other protocols, this was not an impressive increase.
But with veCAKE’s introduction and a possible supply reduction, PancakeSwap might experience an influx of users who aim to get better yield from the protocol.
<div id="attachment_359921" style="width: 100%" class="wp-caption aligncenter"><a href="https://statics.ambcrypto.com/wp-content/uploads/2023/12/Screenshot-2023-12-21-at-10.55.12.png" data-wpel-link="internal" rel="noopener noreferrer nofollow"><img aria-describedby="caption-attachment-359921" decoding="async" class="wp-image-359921 size-full" src="https://statics.ambcrypto.com/wp-content/uploads/2023/12/Screenshot-2023-12-21-at-10.55.12.png" alt="PancakeSwap's Total Value Locked" width="778" height="324" srcset="https://statics.ambcrypto.com/wp-content/uploads/2023/12/Screenshot-2023-12-21-at-10.55.12.png 778w, https://statics.ambcrypto.com/wp-content/uploads/2023/12/Screenshot-2023-12-21-at-10.55.12-300x125.png 300w, https://statics.ambcrypto.com/wp-content/uploads/2023/12/Screenshot-2023-12-21-at-10.55.12-768x320.png 768w" sizes="(max-width: 778px) 100vw, 778px"></a>
 Source: DefiLlama
</div>
AMBCrypto evaluated CAKE’s Market Value to Realized Value (MVRV) ratio. Using Santiment’s <a href="https://app.santiment.net/charts/oTnsjOUr__sCl" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="external">data</a>, the 365-day MVRV ratio was -6.735%.
This means that if every CAKE holder who bought within the last year sold, they’d make an average loss of 6.735%. Therefore, it could be in the best interest of holders to refrain from selling.
If the token price continues to increase, then the MVRV ratio might flip positive. This would also allow holders to move into the unrealized profit zone.
How much are <a href="https://ambcrypto.com/convert/1-cake-to-usd" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="internal">1,10,100 CAKEs worth today</a>?
Meanwhile, CAKE’s social dominance increased to 1.694%. The increase in social dominance implies that PancakeSwap has been getting some hype.
<div id="attachment_359927" style="width: 100%" class="wp-caption aligncenter"><a href="https://statics.ambcrypto.com/wp-content/uploads/2023/12/PancakeSwap-CAKE-11.14.23-21-Dec-2023.png" data-wpel-link="internal" rel="noopener noreferrer nofollow"><img aria-describedby="caption-attachment-359927" decoding="async" class="wp-image-359927 size-full" src="https://statics.ambcrypto.com/wp-content/uploads/2023/12/PancakeSwap-CAKE-11.14.23-21-Dec-2023.png" alt="PancakeSwap social dominance and MVRV ratio" width="2560" height="867" srcset="https://statics.ambcrypto.com/wp-content/uploads/2023/12/PancakeSwap-CAKE-11.14.23-21-Dec-2023.png 2560w, https://statics.ambcrypto.com/wp-content/uploads/2023/12/PancakeSwap-CAKE-11.14.23-21-Dec-2023-300x102.png 300w, https://statics.ambcrypto.com/wp-content/uploads/2023/12/PancakeSwap-CAKE-11.14.23-21-Dec-2023-1024x347.png 1024w, https://statics.ambcrypto.com/wp-content/uploads/2023/12/PancakeSwap-CAKE-11.14.23-21-Dec-2023-768x260.png 768w, https://statics.ambcrypto.com/wp-content/uploads/2023/12/PancakeSwap-CAKE-11.14.23-21-Dec-2023-1536x520.png 1536w, https://statics.ambcrypto.com/wp-content/uploads/2023/12/PancakeSwap-CAKE-11.14.23-21-Dec-2023-2048x693.png 2048w" sizes="(max-width: 2560px) 100vw, 2560px"></a>
 Source: Santiment
</div>
However, market players may need to be careful with buying CAKE in the short term. If the social dominance continues to increase, it could be a sign of a local top. Hence, buying CAKE at $2.68 might not be a good entry.

PancakeSwap plans to reduce CAKE supply – what now?

AMBCrypto

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