What Is PancakeSwap?
PancakeSwap is a decentralised exchange (DEX) built on the Binance Smart Chain. It enables users to swap BEP-20 tokens, which are the type of tokens native to the Binance Smart Chain.
BEP-20 is a blueprint that enables developers to easily launch their own tokens, while swapping them on the more efficient Binance Smart Chain means lower fees for traders than Ethereum. Also, as PancakeSwap is a DEX, those fees are shared between its users, rather than going to a company like they would for a centralised exchange.
Users can provide liquidity to PancakeSwap by depositing the required tokens. They are rewarded for this with liquidity provider tokens. These liquidity provider tokens can then be staked in PancakeSwap’s farms to earn the protocol’s utility token—CAKE.
CAKE can be staked to earn more CAKE or other tokens, used to vote on PancakeSwap governance proposals, and even used to buy PancakeSwap lottery tickets.
Ways to Invest in PancakeSwap
Some investors like to hold onto their coins for the long term, while others prefer to turn a quick profit and sell. Choosing a strategy and a timeline depends on your own investment goals, and we’ll be examining how well-suited CAKE is to both these options below.
Buy and hold PancakeSwap
This strategy is fairly self-explanatory: you buy some CAKE and you hold onto it for a period of time. It’s the simplest strategy to execute and won’t require that you do any technical analysis. What’s more, if PancakeSwap is successful, there’s the potential to make a decent profit from holding CAKE.
There is also the opportunity to earn interest on your CAKE while you’re holding it. Holders can stake their CAKE in PancakeSwap’s pools to earn rewards in CAKE, or any number of other BEP-20 tokens on offer.
Best PancakeSwap wallets
Once you’ve bought your CAKE, you may wish to transfer it to a private wallet to provide an extra level of security and ensure you have full control over your tokens. The most secure type of wallet is a hardware wallet, such as Trezor, KeepKey, or Ledger. You’ll have to pay for these and they may take a bit of getting used to.
Although a bit less secure, software wallets are easier to use and can be downloaded onto your computer or mobile device for free. If you want to use PancakeSwap, you’ll need a wallet supported by the protocol, which includes MetaMask, WalletConnect, Trust Wallet, MathWallet, and SafePal.
The volatility of CAKE’s price means that traders can also benefit from buying and selling it over shorter timeframes to make more frequent profits. This strategy will require more concentration and knowledge as traders often analyse charts and the markets to find the best times to buy and sell.
As they buy and sell much more frequently, traders may find private wallets less convenient as regularly transferring their tokens can be time-consuming and costly. Web wallets may therefore be the best option for traders—and your trading platform will generally provide one for free.
Should I Buy PancakeSwap Now?
You will have to decide this for yourself based on what you know about the project and the crypto market in general. The demand for CAKE is an important factor in determining its price and this is driven by the benefits of staking it and its other various utilities on the PancakeSwap platform.
The supply of CAKE is currently inflationary, which could put downward pressure on its price. However, CAKE from a number of sources, such as lottery tickets and PancakeSwap’s NFT Market, is burned, which means that enough activity on the platform could lead to CAKE becoming deflationary.
Ultimately then, the price of CAKE will be heavily influenced by the success of PancakeSwap. The fees charged on the DEX are much lower than those on the Ethereum-based alternatives, and additions such as the NFT Market have proved popular. Therefore, if PancakeSwap continues to innovate and provide new offerings for its users, the price of CAKE could react positively.