Why is PancakeSwap (CAKE) Pumping? Protocol Proposes 300M Token Supply Cut

In a bid to boost liquidity, decentralized exchange PancakeSwap proposed to significantly reduce the total supply of its native token, CAKE. According to a blog post on Thursday, the DEX proposed cutting its token’s total supply to a maximum cap of 450 million.

The proposed cut would see PancakeSwap no longer issue 300 million CAKE of its earlier introduced maximum supply of 750 million tokens. Additionally, with 388 million CAKE already in circulation, the reduction would mean the project has only 65 million CAKE left to unlock.

Following the announcement, CAKE surged over 20% from $2.26 to $2.72 before a retracement in the hours leading up to press time. The token also saw a 157% increase in trading volume, with over $188 million exchanging hands in the token’s market.

Step Essential for an Ultrasound CAKE

“Total supply is an important metric when understanding the impact of token burns and future emissions. Lowering this number is a critical step to achieve ultrasound CAKE and to send a clear signal of PancakeSwap’s pivotal away from a hyperinflationary tokenomics model,” PancakeSwap stated as one of its reasons for the cut.

PancakeSwap also added that the blockchain protocol, over its three years of existence, has now deciphered the amount of CAKE it needs to achieve its target growth. According to the decentralized exchange, 450 million CAKE is a sufficient total supply that positions the token for future growth.

Way Back?

CAKE has endured a difficult period, seeing its token’s price tank significantly this year. The PancakeSwap’s native token is 94% down from its all-time high of $43.96.

In April, PancakeSwap pushed a new deflationary model for its community approval, which would see more CAKE tokens burned in order to reduce inflation to between 3 and 5%. The concept, however, didn’t prevent a price slump from CAKE, with the token falling by 27% that month and 38% the month after.

PancakeSwap is hopeful that the latest move will position CAKE for a price rally in the upcoming bull run.