PancakeSwap's native CAKE token price surged nearly 10% today, according to CryptoSlate's data, following the decentralized exchange (DEX) proposal to reduce its maximum supply by 300 million to 450 million tokens.
There are currently roughly 386 million CAKE tokens issued, with 267 million in the circulating supply. The circulating supply is, therefore, around 35% of the maximum supply possible at 750 million. By reducing the maximum supply to 450 million, the circulating supply would increase to 59%. Further, the fully diluted market cap would fall from around $3.8 billion to about $1.7 billion.
The proposal
The project explained that successfully reducing its token supply will “signify PancakeSwap's successful shift from a high-inflation emissions model to the Ultrasound CAKE era.”
The team also stated that the new and lower cap would help the project gain market share across all chains and sustain its veCAKE model.
“450 million CAKE is a reasonable new cap to implement in order to ensure sufficient supply for future growth (e.g., gaining market share on Ethereum, Ethereum L2s, and new initiatives like position managers),” PancaeSwap's Kitchen added.
Early voting patterns suggest the proposal is gaining substantial community support, with around 95% of the total 300,000 votes cast at press time supporting the move. Voting will end on Dec. 29 by 8:00 am UTC.
CAKE rallies
The potential reduction in supply has propelled the CAKE's value to $3.78, hinting at possible further improvements upon implementation.
However, CAKE remains significantly below its previous peak price of $44, currently down by more than 90%, according to CryptoSlate's data.
PancakeSwap's CAKE currently has a circulating supply of 386 million, which means there would be token burns for the proposal to be fully implemented in January. A token burn is one of the many ways a cryptocurrency's value can increase as it enhances the asset scarcity in the market.
PancakeSwap is the dominant decentralized exchange protocol operating on the Binance-backed BNB Smart Chain. The protocol boasts a total value locked exceeding $1.6 billion and has consistently maintained an average daily trading volume surpassing $500 million during the past week, according to DeFillama data.
PanCakeSwap also exists on chains like Aptos, Ethereum, Arbitrum, Base, zkSync Era, Linea, and Polygon zkEVM.