Shiba Inu (SHIB -0.41%) is one of the most divisive cryptocurrencies on the market. On the one hand, it delivered a once-in-a-lifetime return of 43,800,000% in 2021, which would've turned the price of a cup of coffee into $1 million with a perfectly timed investment.
On the other hand, the token still hasn't garnered any real adoption as a payment mechanism, so it primarily exists as a vehicle for speculation. For that reason, it's nursing a 69% loss so far in 2022.
But there is one unlikely path for Shiba Inu tokens to soar from the current price of $0.00001 all the way to $1, although it might take a little bit (OK, a lot) of time.
Feel the burn
The cryptocurrency industry generally faces several challenges in the near term. Among them, you'll find increased regulation, sturdier tax reporting requirements, and a general decline in investor confidence. But one problem unique to Shiba Inu is its enormous supply.
There are 589.6 trillion Shiba Inu tokens in circulation right now, which makes it difficult to achieve a price of $1. Simple math dictates that if it reached that point, Shiba Inu would have a market valuation of $589.6 trillion, which would make it the most valuable asset on Earth by a wide margin. To alleviate this issue, developers are coming up with ways to burn tokens, which removes them from circulation forever.
ShibaSwap is a burn portal designed to incentivize holders to give up some of their Shiba Inu tokens in exchange for burntSHIB tokens, which can be staked to earn rewards. In addition, developers are building a metaverse that will serve as a virtual world for the community. Inside this project, users can purchase plots of land using Ethereum (ETH -0.90%), and then they can spend Shiba Inu tokens to assign a unique name to those plots. All Shiba Inu spent in this manner will be automatically burned.
But could this work well enough to boost Shiba Inu's price per token?
Here's what the math says
At a price per token of $0.00001, and with 589.6 trillion tokens in supply right now, Shiba Inu has a total market valuation of $6.1 billion.
If Shiba Inu creates no additional value beyond serving as a vehicle for speculation, then burning tokens is the only path to $1 -- and its current supply would need to shrink significantly to get there.
To be precise, the number of tokens in circulation would need to shrink from 589.6 trillion to 6.1 billion. That's a drop of 99.9998%, and it basically means there would be 6.1 billion tokens priced at $1 each, which equals a $6.1 billion market valuation. Put simply, there would be no change in the overall value of Shiba Inu's market capitalization.
So how long would it take to shrink the supply by that much? At the time of this writing, 157 million Shiba Inu tokens have been burned in the last 24 hours. While that number fluctuates, if you assume it remains constant each day for the sake of this thought experiment, roughly 57.4 billion tokens would be burned each year.
Therefore, it would take a shade more than 10,270 years to burn enough tokens to reach a price of $1.
It's a lot of work for no real gain
In order to reduce supply by such a significant volume, every Shiba Inu investor would have to participate in the burn. Each Shiba Inu holder would see their own token count fall by 99.9998%, and although each token would now be worth $1, it means the overall value of their position would remain exactly the same. After all that work, the net gain is zero.
Also, that's ignoring the elephant in the room: No existing investor would be alive by the time the burn is complete.
Drumming up such broad-based participation would also be extremely difficult. Since most Shiba Inu investors are speculators, there's little incentive for them to give up a piece of their holdings for the greater good.
The only way for Shiba Inu to create real value for investors is to serve as a useful payment mechanism that businesses and consumers can easily adopt. Based on the token's track record, it seems unlikely that's going to happen.