PancakeSwap (CAKE): A DeFi App for Tokens’ Exchange and Liquidity Provision
PancakeSwap (CAKE), an automated market maker, provides users with enhanced functionality to exchange tokens and provide additional liquidity to target parties.
What is CAKE?
The current evolution of DeFi creates the objective need for adopting more effective liquidity provision mechanisms that can contribute to more flexible and sustainable operations of users and specialized companies. CAKE allows users to provide their tokens as a source of liquidity through farming, thus obtaining additional returns on their assets. Specific pools are created, and the liquidity provider offers tokens to all participants of this scheme. When depositing these tokens, they can receive CAKE as remuneration. Overall, CAKE contributes to the higher flexibility for holders with the possibility of effectively maximizing their returns on investments. The proof-of-stake mechanism enables users to stake CAKE to receive additional tokens and maximize their passive income. Finally, the project also contributes to the closer integration of various
CAKE’s current market price is $6.93 with the circulating supply of 277.5 million tokens. Its current market capitalization equals $1.9 billion, making it the 57th largest cryptocurrency at the moment. The token does not have a maximum supply, and its supply is adjusted according to the changes in consumer demand and other factors considered by CAKE’s algorithms. CAKE reached the historically maximum level in April of 2021 (with the price exceeding $41) but was unable to reach such levels in autumn of 2021 during the second wave of the BTC and other major cryptocurrencies’ growth. Currently, CAKE’s capitalization continues to decline but it still has a considerable potential for growth in case the global crypto trend is subject to change.
Investing in CAKE: Pros and Cons
The long-term demand for CAKE depends on the following major factors: the dynamics of the DeFi segment; the availability of other major competitors; the development of the proof-of-stake algorithm; and rates of innovations maintained by CAKE’s developers. At the present moment, CAKE remains highly dependent on the overall dynamics of BTC, ETH, and other major cryptocurrencies. The successful transition to Ethereum 2.0 may be highly important for strengthening CAKE’s comparative positions in the future. However, the short-term dynamics is characterized by a higher level of financial and institutional risks.
The short-term dynamics of CAKE experiences the gradual restoration from the minimum level reached last week. At the moment, CAKE approaches the first resistance level at the price of about $7.2. In case it is successfully overcome, CAKE will test the next important level of $8.5. Only if its price exceeds that level, the token may experience the rapid capitalization growth up to the next resistance level, making it reasonable for investors to open long positions. However, the expected dynamics of ETH price also appears to be crucial for making better-supported choices and determining the optimal entry points. CAKE may be effectively used as a portfolio component for diversifying risks and reaching higher sustainability in the long term.
