In 2022, popular meme coin Shiba Inu (SHIB 0.39%) is down 76.21%. To say this performance is disappointing would be a colossal understatement. After all, Shiba Inu burst onto the scene in August 2020 as one of the hottest meme coins ever. In 2021, Shiba Inu delivered eye-popping returns of 43,800,000% and the sky appeared to be the limit.

So now comes the moment of truth for Shiba Inu. Is it destined to become the crypto world's equivalent of a one-hit wonder, or is it building real value for crypto investors who continue to hold it for the long term? There are at least two reasons to believe that Shiba Inu could be ready for a bull run in 2023.

Utility coin or meme coin?

In hindsight, Shiba Inu's attraction as a super-popular meme coin in 2021 was based on nothing more than hype and speculation. The coin featured a cute doggy mascot, and was clearly designed to be the next Dogecoin. It went up, not because of any underlying fundamentals, but because people hoped it would go up. There was always somebody willing to pay more for Shiba Inu.

Shiba Inu dog.

Image source: Getty Images.

The good news is that the creators of the coin are working hard to bring some needed utility to the coin. And that starts with transforming Shiba Inu into a viable payment option. For example, you can now use Shiba Inu as a payment option at a growing number of different merchants. Feeling in the mood for some luxury bling? You can now walk into a Gucci store in North America and pay for your new bag or outfit with Shiba Inu.

In addition, Shiba Inu continues to expand its own ecosystem of products and services where you can use Shiba Inu. For example, the much-anticipated metaverse world from Shiba Inu, known as SHIB: The Metaverse, will feature Shiba Inu as the in-game currency to buy virtual land and non-fungible tokens (NFTs). As the use cases expand, the hope is that investors will increasingly view Shiba Inu not as a meme coin, but as a utility coin.

New upgrade coming soon in 2023

Moreover, Shiba Inu has a much-anticipated technological upgrade coming in 2023 known as Shibarium. This is a Layer 2 scaling solution for Shiba Inu that will help it run faster and more efficiently. It will also make it more affordable to carry out blockchain transactions, making Shiba Inu more attractive to users and developers.

On Christmas Eve, the head developer for the project sent out a message to the Shiba Inu community, saying Shibarium would be coming "very soon." This news, as might be expected, is currently being viewed as a positive catalyst for the price of Shiba Inu, since Shibarium will presumably open up many more use cases for the Shiba Inu blockchain. There's even talk that new decentralized finance (DeFi) solutions might be coming to Shiba Inu.

Burn, baby, burn

While all of this portends well for the future of Shiba Inu, it's impossible to talk about the future prospects of Shiba Inu without mentioning burn rate. In the crypto world, burn rate refers to the elimination of coins from the overall circulating coin supply, usually by sending the coins to an inaccessible digital wallet. 

Right now, the total circulating supply of Shiba Inu is an impossibly large 549 trillion tokens. If Shiba Inu were ever to reach the $1 mark, it would imply a market cap of $549 trillion! To understand how large this coin supply number is, consider that the maximum circulating supply for Bitcoin is capped at 21 million.

Thus, the race is on to burn as much Shiba Inu as possible on a daily basis. While there are constantly new ways being offered to burn Shiba Inu, it might not be enough. It's simply a nearly insurmountable mathematical hurdle. Despite an impressive market cap of $4.5 billion, Shiba Inu still trades for the almost comically low price of $0.00000814.

Is Shiba Inu a buy?

For now, I need to see more evidence of the burn rate really being cranked up to 11 before I can recommend Shiba Inu as a long-term investment. That being said, Shiba Inu is starting to separate from the pack of similar dog-themed meme coins with its new emphasis on utility. If Shiba Inu can continue to transform from meme coin to utility coin, then it might offer upside potential to risk-seeking crypto investors looking for a dog in the hunt in 2023.