Image source: Getty Images
The fundamentals of the meme coin have not changed, so it seems a Valentine’s Day event to burn 162 million Shiba tokens could be driving the pump.
Key points
- Dogecoin competitor Shiba Inu (SHIB) is up more than 40% over the past 24 hours with no developer news to drive the pump.
- The only thing coinciding with the spike was a series of tweets from Bigger Entertainment regarding a “coin burn” event its hosting on Valentine’s Day to destroy more than 162 million SHIB tokens live on that day.
- A coin burn is where a certain amount of crypto is intentionally removed from supply to theoretically raise the value of remaining tokens — basic supply and demand.
- Bigger Entertainment organizes coin burn events for SHIB, so people can pay a small fee via credit card to contribute to a coin burn event to collectively advance the token price.
Over the past 24 hours, dog-themed coin Shiba Inu (SHIB) soared more than 40%. While the broader cryptocurrency market is rebounding from the disastrous 30% decline last month, SHIB seems to be the big dog of the day. What gives?
None of its underlying fundamentals or technicals have changed. The only other short-term driver would be investor/trader sentiment. Something happened yesterday on Twitter that seems to be driving SHIB’s bullish behavior today.
A massive Valentine’s Day SHIB “coin burn” could be driving price action
Sunday afternoon, the CEO of crypto entertainment company Bigger Entertainment, Steven Cooper, tweeted that his company’s Valentine’s Day event will be the “largest burn party” yet:
“Alright #shibarmy. If we sell 1,200 more tickets this becomes the largest burn party we’ve had yet. If you haven’t pitched in yet, get your tickets today. All #shib will be burned live on YouTube Feb. 14th at 2pm CST.
We can do this :)”
For a bit more context, a key driver of Bigger Entertainment’s business is based on burning SHIB tokens en masse. For example, in December, Bigger Entertainment burned 176 million SHIB by selling $5 tickets for attendees to join a virtual SHIB Burn Christmas Party. Bigger Entertainment takes the funds raised from the ticket sales, buys an equivalent amount of SHIB tokens and then “burns the coins” during a live streaming that ticket holders can view and verify the coin burn occurred. As of right now, they plan to burn 162 million SHIB on Valentine’s Day.
Bigger Entertainment also provides several music playlists from artists who have all agreed to donate a percentage of their royalties to buy SHIB for token burns. The SHIB community has burned 2 billion SHIB through the company’s Spotify playlist.
But why burn SHIB?
What is coin burning and why do it?
Coin burning occurs when a crypto token or coin is intentionally sent to an unusable wallet address — thereby removing that specific amount of crypto from circulation. Once a coin or token is sent to a burn address, it’s permanently gone and can’t be retrieved. While it seems counterintuitive to destroy money by removing it from circulation, the concept is based on the fundamental concept of supply and demand.
As the supply of an asset or good decreases, its price tends to increase in value. During a natural disaster, the price of bottled water jumps as cases of the wet stuff become more scarce. That’s the same thinking behind a coin burn. By comparison, Bitcoin has a fixed supply of 21 million coins with 18 million in circulation. Once its finite supply is fully deployed, you can expect to see Bitcoin’s price increase as another Bitcoin will never be created.
SHIB has no supply limit so massive coin burn events are intended to reduce the overall supply. While there’s no guarantee a coin burn will drive the price, crypto scarcity does drive value — Bitcoin is the prime example.
Why pay a company to burn SHIB on your behalf?
Anyone can send as much of their SHIB as they’d like to a dead wallet, however, SHIB doesn’t have its own blockchain and must run on the Ethereum network. The average fee to do any transaction on the Ethereum blockchain is equivalent to $30 right now. Bigger Entertainment only charges $5 U.S. dollars which covers the transaction fees and the SHIB buy-and-burn. So $5 ticket buyers don’t burn their own coins, they buy and burn other circulating coins on the cheap.
Is SHIB a buy?
Despite today’s massive jump, SHIB is still down more than 60% since it hit a record high of $ 0.00008845 in October 2021. While there may be some upside in the short term, this current price action does not seem sustainable. SHIB has more than 589 trillion tokens in circulation and a sizable market cap of $17.6 billion, according to CoinMarketCap.
For SHIB to reach a price of $0.01 per coin — that’s one penny — would require SHIB to reach a market cap of $5.89 trillion. That’s not going to happen when you consider that the entire crypto market — NFTs, DeFi, Bitcoin, everything — is only $2 trillion. Right now SHIB is fun to watch, but I wouldn’t consider it seriously until it creates its own blockchain, which is reportedly only being tested.
Until then, I plan to check out the Valentine’s Day SHIB burn party as a spectator, or maybe I’ll just burn the $5 myself.
Buy and sell crypto on an expert picked exchange
There are hundreds of platforms around the world that are waiting to give you access to thousands of cryptocurrencies. And to find the one that’s right for you, you’ll need to decide what features that matter most to you.
To help you get started, our independent experts have sifted through the options to bring you some of our best cryptocurrency exchanges for 2021. Check out the list here and get started on your crypto journey, today.
