PancakeSwap's CAKE Is Down 93% From 2021 Highs

The DeFi Star

I think almost everyone involved in Crypto and especially DeFi has some CAKE locked up somewhere generating yield. This was definitely a no-brainer move during 2021 and even early 2022. However, the infamous bear has managed to really claw deep into CAKE, causing an absolute bloodbath. After trading as high as $44 last year, CAKE is currently trading in the $3 zone. Regardless of the yield, unless you are compounding with a reasonably long-term view you are currently absorbing a ton of pain. This is the downside of DeFi that nobody really likes to discuss. However, it’s a reality and one that requires planning if you are going to endeavor to earn a DeFi income.

It All Depends On Your Motivation

Some utilize DeFi strategies to earn a form of income, while others are simply looking to grow their stack over time. For the latter, a bear market is not great but it’s still not a major issue, as it is to the investor generating an income. If you were earning 100 CAKE per month at the peak you would have enjoyed an additional $4K per month. However, currently, 100 CAKE would only generate a few hundred dollars! This is a massive difference and if you were reliant upon that income you would be in a very difficult position. This is where diversification comes into the picture and presents an extremely good case.

Not Only Multiple Income Streams

It doesn’t help much to have multiple streams of income flowing from the same source. In other words, if you have multiple DeFi streams of income then you are not really diversified, are you? Yes, to some extent you are but not if the DeFi sector experiences a DeFi winter or general bear market as we are currently experiencing. There are other forms of passive income, it’s just that most people think DeFi and staking when they hear the term, “passive Crypto income”. Having these dollar-based income streams can be a real blessing in a bear market. This is also where it really helps to have trading skills, as traders can make money regardless of the direction of the market.

Risk/Reward

For new CAKE investors, this particular opportunity is beginning to look somewhat attractive again. With a token that has such an aggressive yield, buying the approximate bottom can be extremely lucrative. I experienced this at the beginning of 2021 when I purchased CAKE at approximately $6 to $7. The price went on to top out at $44 in May, which is a great return on my initial investment. In a scenario like this, you have to remember that not only is your initial investment up but you are also generating CAKE tokens that can be sold at a healthy profit. CAKE is now entering that “sweet spot” for accumulation, although I believe better bargains are on the way.

CAKE at $2 would be a price range that I would be relatively happy with. That being said, as the market moves and price action matures, a more accurate assessment can be made. However, as things appear currently, that would be a decent buy in my view. The fact that the team is also looking to make adjustments to the emission rate, as well as other tweaks, also provides further incentive.

Final Thoughts

DeFi is a terrible sector to be exposed to in a bear market but once the trend pivots it can be one of the best exposures. This is ultimately what needs to take place in my opinion. The market needs to first establish a cycle bottom before I would look at DeFi tokens for accumulation. As mentioned, the $2 mark looks to be a realistic price level relative to how the market is likely to unfold. However, one needs to travel with the price action and maturation of the market in order to find the best possible entry.

Disclaimer

First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.

This article was first published on Sapphire Crypto.

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