- CAKE’s value increased by 21% as a result of the new proposal.
- A possible approval could put CAKE in pole position for a rally.
Decentralized exchange PancakeSwap [CAKE] has proposed reducing the maximum supply of its original token from 750 million to 450 million.
According to the project, the movement is necessary if the token wants to move from a high-inflation model to a more efficient one.
Although the proposal would still be discussed, responses from the PancakeSwap forum indicated that some community members supported the proposal. The main reason for the support is that the decrease in supply could cause a jump in the value of CAKE.
Icing on the veCAKE
Moreover, the proposal seemed to be in line 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-transferable version of CAKE.
During the implementation, PancakeSwap noted that the token would enable active participation in the project’s governance.
So it’s possible that veCAKE would be crucial in determining the outcome of the latest proposal. At the time of writing, CAKE’s total offering was $236.71 million.
The outcome of the disclosure was positive for CAKE. At the time of writing, the cryptocurrencies value has increased by 21.16% in the last 24 hours.
The increase seemed much needed 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 could change for the cryptocurrency’s price action.
Source: CoinMarketCap
Another metric that could be affected by PancakeSwap’s proposal is Total Value Locked (TVL). The TVL measures the total amount of assets locked in a protocol.
When the TVL increases, it means that market players consider a protocol to be reliable. If the TVL decreases, this implies something else.
The end of the battle may be near
At the time of writing, PancakeSwap’s TVL was $1.47 billion, representing an increase of 4.49% over the past 30 days. Compared to other protocols, this was not an impressive increase.
But with the introduction of veCAKE and a possible reduction in supply, PancakeSwap could experience an influx of users looking to get better returns from the protocol.
Source: DefiLlama
AMBCrypto evaluated the market value to realized value (MVRV) ratio of CAKE. With the help of Santiment factsthe 365-day MVRV ratio was -6.735%.
This means that if every CAKE holder who bought something last year sold, they would make an average loss of 6.735%. Therefore, it may be in the best interest of the holders to refrain from selling.
If the token price continues to rise, the MVRV ratio could turn positive. This would also allow holders to move into the unrealized profit zone.
How much are 1,10,100 CAKEs worth today?
Meanwhile, CAKE’s social dominance has increased to 1.694%. The increase in social dominance implies that PancakeSwap has become hyped.
Source: Santiment
However, market players may need to be cautious about buying CAKE in the short term. If social dominance continues to increase, this could be a sign of a local top. Therefore, buying CAKE for $2.68 may not be a good entry point.