This has been a volatile year for cryptocurrencies, with plenty of wild swings, but prices have mostly trended down overall. Market leaders Bitcoin (BTC 2.45%) and Ethereum (ETH 1.78%) have declined by 55% and 57%, respectively, since the beginning of January, so almost nowhere has been safe for crypto investors.
That's especially true for holders of smaller meme tokens like Shiba Inu (SHIB 1.69%), which has lost 65% of its value in 2022 and is down 86% from its all-time high set in October last year. The token generated one of the greatest returns in the history of finance for the 2021 full year, soaring 43,800,000%.
In dollar terms, a perfectly timed investment would've turned a mere $3 into over $1 million. Now, investors are looking ahead to the next potential blockbuster Shiba Inu gain. But here's why one of the most ambitious price targets won't be reached anytime soon.
Shiba Inu is failing the adoption test
A hallmark of any successful currency is the willingness of consumers and businesses to adopt it, hold it, and transact with it every day. That comes with a level of confidence that the currency is stable enough to store their wealth, with assurances that they're protected in the event of a crisis.
Shiba Inu simply doesn't fit those criteria, and the aforementioned monster price gain from 2021 followed by the subsequent epic collapse, means the token can't be trusted as a store of value. It's the reason only 659 merchants in the entire world accept Shiba Inu as payment for goods and services, and why the average consumer isn't rushing to buy it.
Plus, if Shiba Inu tokens are lost, stolen, or the project simply fails, consumers have no recourse at all to recover their funds. That's in stark contrast to the average U.S. bank account, which is automatically insured under the Federal Deposit Insurance Corp. (FDIC) for up to $250,000 in deposits per person, even if the bank fails.
But here's the main reason Shiba Inu won't reach $1 anytime soon
Shiba Inu can't reach $1 under present circumstances because there are simply too many tokens in circulation. As of now, over 589 trillion tokens are floating around in the market. At the current price of $0.000012 per token, that gives Shiba Inu a total market value of $7.1 billion.
What would happen if the price of a Shiba Inu token rose to $1? Well, the math is simple. It would have a total market value of $589 trillion, which is a staggering number for a few reasons.
It would make Shiba Inu 230 times more valuable than Apple (AAPL 0.32%), which is the world's market cap leader. It would also be at least 25 times bigger than the total economic output of the U.S. as measured by its gross domestic product (GDP). Lastly, $589 trillion is more than all of the recorded wealth currently held by every individual, company, and government on earth combined, which currently stands at $530 trillion.
But with that said, there might be a sliver of hope for investors wishing to see Shiba Inu soar to a much higher price.
$1 isn't totally off the table
Now that Shiba Inu's supply problem is clearly highlighted, the logical solution to reaching higher prices is to simply reduce that supply. This can be done by burning tokens, which means removing them from circulation forever, and the community is doing this in a variety of ways.
One way is to send Shiba Inu tokens to a dead wallet, where they'll remain inaccessible forever -- but that's also kind of boring. To spice things up, enthusiasts can stream a specific music playlist, which burns about 20 tokens per song because the rights owners have agreed to allocate some of their royalties to the cause. For coffee drinkers, the Shiba Coffee Company will also burn a portion of their profits every time they sell a product.
But the most fun way to burn tokens might be inside the community's upcoming metaverse. The virtual world will serve as a meeting place for Shiba Inu enthusiasts, featuring games and more than 100,000 virtual land plots. These can be purchased using the Ethereum cryptocurrency, and almost 20,000 have already been sold. But if plot owners want to rename their properties, they can do so by paying a small fee in Shiba Inu, which is immediately burned.
While this could technically result in Shiba Inu reaching $1 someday, investors will have to burn tokens much faster than they are right now. As it stands, it could take more than 10,000 years to burn enough supply to reach that lofty price.
But there is one final catch. Burning enough tokens to meaningfully increase Shiba Inu's price will require participation from all investors. It means everybody will be giving up some of their tokens, and so while the price might rise, it won't change the net value of their holdings.