PancakeSwap, the leading decentralized exchange on the BNB Chain, has just announced the burn of over 7 million units of its native cryptocurrency, CAKE. The tokens subjected to the burn were worth $30 million.
What is Token Burn?
Token burning is a process of removing portions of a particular cryptocurrency from the circulating supply. This reduces the total number of that cryptocurrency and increases demand. Token burning is one way cryptocurrencies can combat inflation. Examples of cryptocurrencies implementing the burn mechanism are Binance coin and Ethereum.
In PancakeSwap’s case, the token burn can be attributed to its rebound in trading volume. CAKE saw an average daily trading volume of around $153 million in the past month. Since the start of February, however, the value has increased. On February 7, for example, CAKE saw a trading volume of $317 million within 24 hours.
Current data shows that the token has a daily trading volume of around $215.8 million.
PancakeSwap’s Token Burn Breakdown
PancakeSwap shows the breakdown of the token burn. Trading fees derived from swaps and perpetual saw 189,000 CAKE tokens burnt. Prediction and lottery services saw 71,000 and 30,000 CAKEs, respectively, get burnt. The project’s NFT market recorded a 26% reduction as 566 CAKEs got burnt.
Data on the price aggregator platform, CoinGecko, shows that PancakeSwap has a total supply of about 370 million. This is a little over half the maximum supply of CAKE, which sits at 750 million, as shown in the revised tokenomics of the protocol.
This is not the first time PancakeSwap has conducted a crypto burn. The token-burning mechanism dates back to 2022, when the protocol saw regular burns. The last burn occurred on January 30, 2023, and removed 7 million units of the protocol’s cryptocurrency. At that time, the total CAKE tokens were worth $29 million.
CAKE Records 13% Increase
Due to bearish trends, CAKE held a trading price between $3 and $3.5 during January. This is a massive 94% decrease from its all-time high of $43.9 in April 2021.
At the time of writing, CAKE trades at $4.3, representing a 13% increase from its price a month earlier.
Image: Midjourney
