@edicted/august-30th-cub-ido-cakepop
Minutes after writing my last post I became privy to some new information about how Cakepop works. This isn't fully clear in the announcement and is described as "dividend yield" in the original announcement post.
What I've come to understand since then is that Cakepop will have zero inflation (Max Supply: 1,000,000,000) and that there will be no LP farms. In fact, no one will be able to add liquidity to the liquidity pool: it will remain locked for all time and only be used to extract/pump cakepop/busd.
What we have here is a deflationary defi token.
CAKEPOP Mechanics:
- 7% Rewards Tax: 7% Tax on CAKEPOP TXs Used to Buy $CAKE and Distribute to CAKEPOP hodlers
- 1% Marketing: 1% Tax on CAKEPOP TXs Used to Fund Ongoing Marketing Campaigns to Spread the CAKEPOP Brand and HODLER count
I wasn't interpreting this correctly the first time around but this is a huge tax on every move we make within the system. We like to call that 'extremely high friction' in the crypto business. There's an 8% tax on every buy and sell that happens, ever. This is a massive fee that seems designed to snowball effect, pumping the price up at least in the short-medium term.
For example, if you bought $100, you'd then be left with $92 worth of cakepop. Then if you sold that $92, you'd be left with $84.64 BUSD.
Then...
- $77.86
- $71.64
- $65.90815232
- $60.6355001344
- $55.78
- $51.32188731375616
- $47.21
After 9 jumps, already more than half of the money has been lost. This token is hyper-deflationary given enough demand, but the long-term tokenomics promote low velocity and stagnation. Kinda the perfect combination of variables to create a pump/dump at the peak of a mega-bubble at the end of the year... perhaps.
Giggity.
In any case, 7% of the crazy 8% TX fee is apparently used to buy Cake and distribute it as yield. How does the Cakepop/Cake LP have any liquidity? Dun know. Guess we'll figure that out in the days to come (or more likely the fee is extracted as BUSD).
The point is: what happens to the Cakepop tokens after they are dumped for Cake? They are locked inside LP and the value is distributed to all the holders in the form of Cake, encouraging even more buying. This hulking engine is going to feed into itself for a while before it seizes up.
This system is almost surely to lead to a short-term hype-cycle supply-shock. In fact, everything about cakepop seems to be tailored to create that exact outcome. The marketing and giveaways will be key for creating the necessary FOMO and momentum that feed into the hyper-deflationary mechanics, thus mooning the short-term price.
Sign me up for some gambling... it's been a while.
It looks like this will turn into the ultimate game of the Greater Fool's theory; a grand game of musical chairs in which you hope not to be the last one to try and sit down without a chair, else the market fall out from under our bags. Will you sell too soon and miss out on the moon? Or will you sell too late and get stuck with the bill?
Given the timing of the drip on the dev fund (6 months) the metrics on this bad boy seems quite targeted toward capturing liquidity during the Q4 2021 bull run predicted from the 4-year cycle of Bitcoin's halving event. Most of the money will be unlocked by the end of the year. Note the timing.
Security of IDO
Normally with these kinds of launches we'd have to worry about dumping right after launch. This is what happened constantly during the ICOs of 2017/2018. However, after the IDO on Cakepop no one will be able to dump at a profit, so the chance of a crash, combined with these tokenomics, is basically zero as long as there isn't some kind of catastrophic failure like a hack (which is obviously always a possibility with any new project).
Conclusion
It becomes clear to me that this IDO is going to be a lot more fun than originally anticipated. Is it a pump/dump? Maybe. Is it unsustainable? Sure. An 8% fee will grind the gears of this system to zero eventually and all velocity will be lost, but at the same time that same 8% fee will be used to fuel at least one hyper-deflationary hype cycle. Everything is set up to hit the ground running and see how high the insanity can climb.
With no inflation and 7% of the total number of coins being redistributed as a dividend every time the volume washed around equals the market cap, it's hard to imagine the initial IDO being a bad deal. Perhaps it really is a "fair distribution" compared to other similar projects. Everything's relative.
I'm definitely going to have some fun with this one. This is the kind of thing that could randomly go x1000 or get hacked and go to zero immediately. Those who've been around the DEFI block have already experienced the risk and volatility of these things, but it's always a safe reminder to never gamble more than you're willing to lose.