Bitcoin

PancakeSwap (CAKE) aims to take over part of the Uniswap domain in the DeFi area

Decentralized funding pushed non-fungible tokens into the background for the past month, but that hasn’t stopped DeFis large-scale projects from developing and designing strategies to increase their ecosystems and market share.

One project that has outperformed the field lately is PancakeSwap (CAKE), Binance Smart Chain-based Automated Market Maker (AMM) that allows users to trade tokens and earn some of the fees through income farming.

Monthly trading volume at PancakeSwap. Source: Delphi Digital

According to a recent report from Delphi Digital Several factors have played an important role in the growth of the PancakeSwap ecosystem over the past few months. Analysts predict the protocol will remain a serious competitor to Uniswap.

Users are fleeing high Ethereum fees

PancakeSwap (CAKE) aims to take over part of the Uniswap domain in the DeFi area
PancakeSwap (CAKE) aims to take over part of the Uniswap domain in the DeFi area

Anyone who has tried to conduct transactions on the Ethereum (ETH) network in 2021 will have noticed the astronomical rise in gas rates, compounded by the rise in the price of ether.

Average gas rate on Ethereum. Source: Etherscan

If we compare this graph of Average Gas Rates on Etherum to the previous graph listing monthly trading volume on PancakeSwap, a correlation can be seen between higher rates and more activity on the DeFi platform.

As Ethereum fees skyrocketed, Binance Smart Chain (BSC) has proven to be a viable option thanks to numerous bridges between chains and low transaction costs. PancakeSwap is the largest and most established decentralized switch in the BSC and benefits from the influx of users and Binance’s large user base.

Delphi Digital analysts identified the immense Binance ecosystem as another important factor for CAKE “Tremendous network effect” stems from the “largest cryptocurrency exchange that is usually the first choice for retailers”.

Prospective users can easily access BSC by swiping their Binance tokens into a BSC compatible wallet.

PancakeSwap could be an “eternal vampire”

Delphi Digital is also highlighted CAKE’s token economy as an important factor for future growth.

not how UNIVERSITY Y. SushiSwap (SUSHI), There is no fixed cap on the delivery of CAKE tokens, which makes the platform the “Ability to constantly conduct targeted vampire attacks to attract liquidity and incentivize project startups at the PancakeSwap AMM. “

CAKE’s current weekly inflation rate is 3.78%. This is significantly higher than UNI’s annual inflation rate of 2%.

Even with various deflationary measures implemented by the CAKE developers, the “The net issuance is roughly 1,000,000 CAKE per week, which corresponds to real annual inflation of 37% (or 0.7% per week).”

According to Delphi Digital, PancakeSwap knows what the current inflation numbers look like and The team announced a government vote to amend the emissions plan with the option to leave it unchanged and reduce it to 23.5 or 22 CAKE per block.

The option to cut emissions to 22 CAKE, which is a 20% decrease, is currently preferred to win and this would reduce CAKE emissions by 1,050,000. This would help neutralize inflation while also allowing the project to maintain its vampire attack capabilities over the long term.

CAKE tries to break past the resistance

Data from Cointelegraph Markets and TradingView show this Since hitting a low of $ 8.30 on February 28, the price of CAKE has made several attempts to hit a new all-time high and at the time of writing the altcoin is trading at $ 15.63.

4-hour chart of the CAKE / USDT pair. Source: TradingView

According to Cointelegraph Markets Pro, The market conditions for CAKE have been favorable for some time.

The VORTECS ™ score, exclusive to Cointelegraph, is an algorithmic comparison of historical and current market conditions derived from a combination of data points such as market sentiment, trading volume, recent price movements and activity on Twitter. A recent test of the system indicated a return on investment of up to 1.497% using specific strategies described in the report.

VORTECS score (green) compared to the CAKE price. Source: Cointelegraph Markets Pro

As seen in the graphic above, The VORTECS ™ score for CAKE turned green, registering a value of 65 on March 21, approximately six hours before the price began to rise for the next four days.

After the first exact increase on March 22nd The VORTECS ™ score continued to climb, peaking at 81 on March 25, three hours before the price began to climb 36%.

With strong support from Binance and low fees for BSC, PancakeSwap is in the enviable position of drawing additional liquidity from Ethereum-based DeFi protocols as a practical solution for high gas rates is still difficult to achieve. Despite inflation-related concerns, analysts have suggested keeping an eye on this Uniswap competitor as the battle for DeFi dominance continues to unfold.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement carries a risk. You must do your own research when making a decision.

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