PancakeSwap (CAKE) token holders have been on a rollercoaster ride as strikers brace themselves for reduced rewards. The community is debating a change in the token’s economic model.
In the past week, governance token CAKE experienced a sustained downward trend, decrease by 24%. While the proposed change appears to be beneficial for PancakeSwap, the heated debate has affected the value of the token.
Community debate on reduced wagering rewards
PancakeSwap is a decentralized exchange (DEX) built natively on the Binance Smart Chain (BSC). It allows users to trade cryptocurrencies, provide liquidity to trading pools and earn rewards in the form of CAKE tokens.
While the DEX has recently gained popularity due to its low fees, fast transactions, and innovative features, the economic proposal has created uncertainty among its investors. According to the proposalthe developers will lower CAKE’s inflation rate from over 20% to 3-5%.
This move is aimed at improving the “long-term health” of PancakeSwap. At the same time, however, it decreases the number of tokens that strikers can earn, leading to a drop in staking rewards. Voting for the proposal began April 26 and ends tomorrow, April 28.
The community has already given a thumbs up to the “aggressive reduction” of staking rewards, which would cut more than half the number of tokens issued.
Staking rewards, in particular, are an essential part of any cryptocurrency. They incentivize token holders to keep their tokens on a platform or wallet instead of selling them on the market. Staking rewards are similar to interest earned on savings in a bank account.
PancakeSwap’s wagering rewards were a major selling point for the project, ranging from 50% to 200% per year, depending on the trading pool. The proposed change has sparked debate within the community, with some arguing that reduced staking rewards will, too drive away investors of the project, leading to a drop in demand.
While the proposed change aims to improve tokenomics by reducing the dilution of CAKE’s supply, it has led to an exodus of strikers. As a result, the price of the token has fallen simultaneously with the amount of CAKE that has not been spawned, as can be seen in the chart below.
Meanwhile, the tokenomics change proposed by the team on April 19 has also significantly reduced staking activity. The amount of the CAKE stake decreased from 1.007 billion to 677.851 million CAKE on April 27.
CAKE plummets 24% in a week
The PancakeSwap (CAKE) token has a Sharp decrease of more than 24% in the past week following the proposed proposal to lower the token’s inflation. CAKE is down 24% in the past seven days, from a high of $3.43 on April 20 to a low of $27.57 on April 27.
The market cap of the token also has fell from a height from $636 million to a low of $506 million in the same period. The sudden drop in the price of CAKE reflects the crypto community’s perception of the proposed change. If passed, the proposed change will have a significant impact on the project’s revenue and likely reduce demand for the token.
The decrease in staking activity has not only affected the liquidity of the token. But also resulted in a decrease in trading volume, leading to bearish trend support.
Featured image from iStock, chart from TradingView
