PancakeSwap burns 6.8 million CAKE but is it enough to keep the bulls indulged

A bit of CAKE was recently taken off the menu but was it enough to cause a scramble for the remaining amount? PancakeSwap announced that it recently burned slightly over 6.8 million CAKE, slightly lowering the circulating supply.

Here’s AMBCrypto’s price prediction for PancakeSwap [CAKE] for 2022-2023

At press time, CAKE had a circulating supply of 141.53 million coins. According to the announcement, the recent token burn eliminated 6.814 million coins. This represented about 0.048% of CAKE’s circulating supply.

Coin burn mechanisms are a great way of trimming down a coin’s inflation and this often has a positive price effect if enough coins are burnt.

? 6,814,867 $CAKE just burned – that’s $31M!

? Trading fees (Swap and Perpetual): 221k CAKE ($1M) +22%
? Prediction: 53k CAKE ($244k) -15%
?️ Lottery&Pottery: 39k CAKE ($179k) +51%
? NFT Market, Profile & Factory: 2k CAKE ($10k) +112%
? IFO: 17k CAKE ($80k) pic.twitter.com/VdCSd1Xf0t

— PancakeSwap ? #BSC (@PancakeSwap) October 17, 2022

The recently burnt 6.8 million CAKE coins made up less than 1% of the total supply. Thus, the burned tokens may not be enough to trigger a major price impact in the grand scheme of things. However, investors may react positively in the short-term to the news of the token burn.

A slice of delight for investors

CAKE’s weighted sentiment and social dominance metrics were already up significantly prior to the token burn announcement.

Source: Santiment

The news may have helped to maintain the favorable market sentiment while fostering the social dominance boost. CAKE’s sentiment shift seemed to have favored its demand. The FTX funding rate improved considerably in the last two days, confirming a return of healthy demand in the derivatives market.

Source: Santiment

As far as risks and rewards were concerned, CAKE’s four-week Sharpe ratio was at 2.47 at the time of writing. This confirmed that CAKE was inclined towards the reward side since the last four weeks. Especially for those that bought towards the end of last week when prices dropped to the lowest level since July.

Source: Messari

CAKE also demonstrated a healthy observation in terms of on-chain demand. Its volume also registered increased activity in the last three days. This was especially the case in the last 24 hours, during which volumes reached as high as $1.14 million.

Source: Messari

The volume might be associated with increased trading activity from the recently reported CAKE burn. However, the largest volume spike occurred on 15 October which also happened to be mid-month. This was around the same time that CAKE’s price action pivoted.

CAKE managed to pull off a 12% upside in the last five days after bouncing off from its current October lows. It traded at $4.64 at press time.

Source: TradingView

It also helped that the market experience some bullish relief in the last 24 hours, thus strengthening CAKE’s upside. Investors should thus expect the current trajectory to persist especially if conditions remain favorable.

While the short-term outlook was already faorable, CAKE might tap into more value in the long-term. Especially if the token burns occur regularly.