Imagine you start counting by one every second starting right now. How long would it take you to count all of the Shiba Inu (SHIB -0.30%) coins currently in circulation? Unless there are some major advances in medical technology, you’d never finish. It would take more than 17,398,756 years to count every SHIB token.
But the number of coins in circulation is decreasing thanks to a new burning portal that’s been in place since April. More than 22.2 billion SHIB tokens were burned in the previous seven days leading up to May 22, 2022, according to the ShibBurn website. And the burn rate is increasing. Is Shiba Inu’s burning surge already paying off?
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At first glance
It might seem easy to determine if the burning of Shiba Inu tokens is boosting the cryptocurrency’s price. Just look at the performance since the burning started, right?
At first glance, following this approach might lead us to conclude that the burning has been an abysmal failure. Since burn portal on the ShibaSwap exchange launched on April 23, 2022, Shiba Inu’s price has plunged close to 50%.
The problem, though, is that it’s practically impossible to know how Shiba Inu would have fared if a significant level of burning wasn’t taking place. Most other cryptocurrencies have also fallen quite a bit over the past month.
Rival meme coin Dogecoin, for example, is down almost 40%. ApeCoin has plummeted nearly as much as Shiba Inu has. Metaverse cryptocurrency The Sandbox has fallen even more than SHIB during the period.
Obeying the laws
I suspect that the burning of SHIB tokens is already working. It should be, anyway.Â
One of the laws of supply and demand states that if the supply of something decreases while demand remains constant, the price will go up. Burning Shiba Inu is definitely decreasing the supply by reducing the number of coins in circulation.
Note, though, that there’s an important condition included in that law. The demand must remain constant. This muddies the waters quite a bit. Demand for Shiba Inu — and most other cryptocurrencies, for that matter — hasn’t been constant in recent weeks. Instead, crypto demand has taken a hit. The Terra (LUNA 10.28%) and TerraUSD (UST 34.39%) crashes served as the major culprit.
It would have been interesting to see how Shiba Inu would have performed with burning underway without these headwinds. The one thing we can know is that SHIB tokens would obey the laws of supply and demand like any other asset.
When will the impact be visible?
So when might we see a visible impact from Shiba Inu burning? There will first need to be a period of relative stability in the overall crypto market. Just how long that period would need to last is debatable. My hunch is that at least two or three months would be sufficient.
Sustained burning at high levels would also be required. This prerequisite shouldn’t be too difficult to achieve. SHIB holders who burn their tokens on ShibaSwap can earn rewards for doing so. The upcoming launch of the Shibarium layer-2 solution will feature a burn mechanism as well, which could boost burning levels.
However, investors should probably temper their expectations for how much higher burning will drive Shiba Inu’s price. It’s quite possible that reducing the number of tokens in circulation could serve as a significant catalyst over the next few years. Just don’t look for SHIB to hit $0.01 as a result of burning.
