Shiba Inu (SHIB -2.55%) and its investors won big last year after the popular meme token soared a jaw-dropping 45,000,000%. Support from Shiba Inu’s community — the Shib Army — helped power the initial gain.
The cryptocurrency was built as “an experiment in decentralized spontaneous community building,” according to its white paper. So we could consider 2021 a success for Shiba Inu.
Now, though, for Shiba Inu to move significantly higher from its current level of a fraction of a cent, the road will be more difficult for a few reasons. Here, I’ll focus on one — its circulating supply. Currently, that’s 549 trillion tokens. This makes it almost impossible for Shiba Inu to reach a level such as $1 without market value soaring to an impossible level.
Recently, though, Shiba Inu developers started something that tackles supply. Could this effort eliminate Shiba Inu’s biggest problem and send the token sky high, once again? Let’s find out.
Image source: Getty Images.
A new burn portal
Developers this month launched the Shiba Inu burn portal with the idea of rewarding users for periodically burning their Shiba Inu tokens. Depending on the amount burned, they may access Ryoshi tokens and generate passive income.
When tokens are burned, they’re taken out of circulation for good, and this decreases the supply. That’s definitely a positive for Shiba Inu. So far, billions of tokens have been burned.
Now let’s look at how this can help Shiba Inu. As I noted earlier, the problem now is a major gain would push the market value of Shiba Inu too high. For example, if the token were worth $1, the market capitalization right now would be $549 trillion. That’s more than the entire cryptocurrency market.
The market’s worth about $2 trillion, according to Statista. And the Shiba Inu market cap would be worth more than that of top stocks like Amazon, Apple, and Alphabet combined. Their market values are $1.4 trillion, $2.5 trillion, and $1.5 trillion, respectively.
Time for some math
It’s clear that the number of Shiba Inu tokens must greatly drop. Now let’s do some math. First, let’s decrease the number of tokens to just under 1 trillion — to 999 billion. Next, let’s imagine that Shiba Inu rises to a milestone such as $0.10. The market value then would be $99 billion.
That would make Shiba Inu the third-biggest cryptocurrency after Bitcoin and Ethereum. It seems unlikely Shiba Inu could surpass other players that offer more real-world utility.
But there’s another reason why this scenario is unlikely because for circulating supply to drop from today’s level to 999 billion, it would have to fall by 99%. This means destruction of an enormous number of existing tokens. And that means that most of today’s holders would have to burn their tokens and wouldn’t be able to benefit from future increases.
What does this mean for investors? Yes, burning Shiba Inu and reducing supply is a good idea. But unfortunately, supply today is so vast that even coin burns aren’t enough to fully eliminate the problem.
Shiba Inu remains a risky investment — and right now, coin burns alone don’t look like the route to a higher value.
