Hey folks, so one of the lessons I’ve learned repeatedly in 2022 is to stay away from altcoins as much as possible during the bear market. This especially goes for native exchange tokens, because generally they haven’t had that great of track records. In this article, I’m going to talk about $CAKE, the native exchange token for BSC’s premier DeFi exchange, PancakeSwap, and the many reasons for why it’s perhaps my one exception. I’ll go into depth about what exactly it is I’ve been tracking and why right now it’s really the only native exchange token that I’m interested in.
But first a bit of a history lesson…
In 2021, $CAKE was like crack
If you had done youtube search a year ago looking to learn about the $CAKE token, you probably would have been inundated with a whole bunch of videos that look like this:
Looking at some of the insanely high APY’s with $CAKE’s Syrup pools, it’s no wonder that the number of tokens being printed could not keep up with some of the insane run-ups in price, but I get it — everything in hindsight is 20/20, especially when you see some crazy bull-market 40x action:
In the throws of DeFi summer, $CAKE was reaching some insane ATH’s alongside some mind-blowing high triple-digit interest rates, so it’s really no wonder why a lot of people were aping into it. I’m also guessing there’s a lot of poor lads that aped in but couldn’t get out of their 40-week token locks, only to see the price of their $CAKE get rekt by more than 90%.
$CAKE Today
The reason why I’ve taken interest in $CAKE is because of what $CAKE has been doing since the second half of 2022:
Since last July, the price action for $CAKE has been in a relatively tight $3-$5 range, which actually isn’t that bad considering that during this same period of time we saw FTX collapse, as well billions of dollars worth of FUD-related withdrawals from Binance. Despite all the market craziness, $CAKE has stayed in this relatively tight range AND $CAKE still has a pretty high staking rate of around 50%:
50% is nowhere near the ridiculous 700%+ APY that folks were getting before, but this is mainly because the Pancakeswap team has made some significant changes — all changes made intentionally by design to help $CAKE become a bit more deflationary. These changes include:
July 3rd, 2022: $CAKE emissions are reduced 10% overall to 19 $CAKE per block.
August 3rd, 2022: The first Community Auction farms concludes. Whitelisted projects can bid via $CAKE tokens to try to win the right to host a 10-day farm on Pancakeswap. The winning bids’ $CAKE all get burned. (To date, 867,640 $CAKE have been burned from these auctions)
August 12th, 2022: $CAKE becomes even more emissions neutral, reducing the emissions of $CAKE by 44% (15 per block instead of 19).
September 30th, 2022: Pancakes’ NFT Market launches— all fees are used to buyback and burn $CAKE, 184 $BNB’s worth in just the first day
November 2022: $CAKE emissions are reduced to 14.5 $CAKE per block
December 2022: $CAKE emissions are reduced to 14.25 $CAKE per block
Regardless of all the new burns and emissions reductions, it’s important to note that the net inflation rate of $CAKE is approximately still sitting around 9.2 $CAKE/per block:
For reference, $BTC mining produces around 6.25 $BTC per block, and post-next halving cycle, it should be at 3.125. Similar to $BTC there is also a hardcap on $CAKE, but instead of 21 million, $CAKE has a total hardcap of 750 million.
Conclusion:
No matter how you hack it, 9.2 per blocks is still pretty inflationary, but that being said, the Pancakeswap team has come a very long way since its initial launch when 40 $CAKE per block that was being put into circulation.
In addition, the Pancakeswap team has given $CAKE several other different utilitarian functions that I didn’t previously mention, including access to IFO’s (Initial Farm Offerings), tickets for the PancakeSwap Lottery, minting fees for NFTs, and community voting. With how much the chefs have been building through the bear market, it’s no wonder that they’ve been able to maintain such a strong base of support.
With all these factors combined, I’m waiting for $CAKE to have a possible breakout in the next bullrun, but even if it doesn’t, as long as it sticks around in the price range it is now, earning around 50% APY without any IL sounds pretty good to me.
But please, point out anything that I’m seeing wrong. My aversion towards alts, especially exchange native token alts has me extremely hesitant in general. If you have any additional information that might help me pull the trigger (or go running for the hills) I’d appreciate it.
Thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates.
Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Cheers everyone!
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