PancakeSwap TVL falls 12%, has this swap received a fatal blow?

Image by: Mae Mu – Unsplash

pancake swap (CAKE), the leading multichain decentralized exchange (DEX) running on Binance Smart Chain (BSC), has suffered a significant 12% drop in its total value (TVL) to $2.4 billion.

Crypto regulator crackdown on Binance stablecoin BUSD caused stablecoin supply to drop. This has negatively impacted the growth of the BNB Smart Chain and impacted DEX’s protocols and TVL.

What has made PancakeSwap different from the UniSwap and SushiSwap exchanges since its inception is that it runs on the BSC instead of the Ethereum smart chain. However, PancakeSwap has gone multichain and is launching on both Ethereum and Aptos.

Unlike traditional exchange models, the AMM allows traders to use eligibility pools of liquidity to exchange digital assets, receiving a liquidity provider (LP) token for which they choose to add funds to the liquidity pool.

After According to DeFiIgnas, a decentralized finance (DeFi) researcher, PancakeSwap overtook UniSwap by total value locked on Nov. 29.

In a bold move to address liquidity issues affecting the decentralized exchange, PancakeSwap launched its market maker integration on Ethereum and Atpos in February. The market maker integration will serve as an additional source of liquidity to the existing AMM to help traders operate and “enjoy better liquidity,” according to the exchange.

By integrating PancakeSwap’s MM with its AMM, the exchange will improve the exchange of ERC-20 tokens on the Ethereum smart chain. Additionally, PancakeSwap’s integration with market makers on Ethereum will also result in the launch of Ethereum, Bitcoin, and stablecoin trading pairs on the exchange.

The anonymous developer behind Bourse Boss, the co-founder of Bourse, written down:

We’ve been thinking how best to serve our community and new Ethereum users without emitting overly valuable CAKE to reach extremely high TVL values

With the integration on Ethereum, PancakeSwap will allow customers to be routed to approved market makers and the AMM, according to DeFiIgnas, who explained that this would result in lower fees and better spot prices. He claimed:

It’s a creative solution to the liquidity problem. Liquidity Providers (LPs) do not deposit assets in an AMM when there is no trading volume to generate a return. And users don’t trade where slippage is high. So, market maker integration solves this chicken-and-egg dilemma.

PancakeSwap is scheduled to launch V3 on BSC

PCS continues to innovate the protocol with the launch of V3 on April 1st. The upgrade will add features like improved liquidity delivery, competitive trading fees, trading incentives, and yield farming tools to help users maximize their returns and rewards.

These products can attract more users and capital to the exchange, increasing the revenue of the protocol and increasing the value of PCS for investors. DeFiIgna’s conclusion:

The DEX room is the most fun because of the cut-throat competition. My prediction for 2023 is that this will lead to a diversification of their business model. The market maker integration, uniqueCAKE veTokenomics and various incentives make PCS different.

PancakeSwap native token CAKE is in a downtrend on the 1-day chart. Source: CAKE on TradingView.com

After burning 7 million tokens totaling $27 million on Monday, the DEX’s native token has been trending down since its yearly high of $4.68 in February. Currently, the token is trading at $3.56 after the ongoing troubles in the stock market, despite PancakeSwap’s recent announcements.

Featured image from Unsplash, chart from TradingView.com

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