The cryptocurrency industry has spawned more than 20,000 different tokens. The vast majority of them have failed to offer any utility in the real world, which makes it difficult for them to sustain value over the long term.
Although the combined value of all cryptos reached an all-time high of $2.9 trillion in November 2021, but it has since plummeted by 70% to $860 billion today.
Shiba Inu (SHIB 0.27%) has become the poster child for the speculative fervor that has underpinned the industry's lofty valuation. In 2021, it delivered one of the largest annual returns in history when it soared 43,800,000%. For context, a perfectly timed investment of as little as $3 would've returned over $1 million that year.
But with Shiba Inu now down 90% from its all-time high, the community is working on new initiatives to support the token's price. Believe it or not, there is actually one path for Shiba Inu to rise to $1 per token from its current price of $0.000009 -- but it's going to take much longer than you think.
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Shiba Inu enthusiasts are trying to create value
The key to a cryptocurrency sustaining momentum is adoption. The more people feel like they need to own it, the higher its value will rise, and the best reason to own it is to use it to buy things. That means businesses will have to accept it as payment for goods and services, though that isn't really happening for Shiba Inu because just 708 merchants worldwide are willing to accept the tokens as a form of payment.
A business will avoid a currency that can soar in value by millions of percentage points and then crash in short periods of time because it makes cash flow entirely unpredictable.
Nonetheless, the community is trying to create new ways to drum up enthusiasm for Shiba Inu tokens. On Jan. 8, its official Twitter account hinted at a planned partnership with designer clothing label Bugatti on a series of Shiba Inu-themed bags. It's unclear if payment will be required in Shiba Inu tokens or whether this is just a move to generate publicity.
Plus, developers say the release of Shibarium is imminent, which is a Layer-2 blockchain solution designed to reduce friction and streamline transactions. Shiba Inu is built on the legacy Ethereum (ETH 1.00%) blockchain, which can be expensive and inefficient, so Shibarium could open up new payment-related use cases, and that is exactly what's needed.
But there's only one way Shiba Inu can reach $1
There are more than 589 trillion Shiba Inu tokens in circulation right now, and that serves as a lid on the price, which can prevent potential upside. Why? It's all about math. At the current price of $0.000009 per token, Shiba Inu has a total market valuation of $5.4 billion.
If it rose to $1 per token, the 589 trillion supply figure means Shiba Inu would reach a market valuation of $589 trillion! It would be the most valuable asset on Earth by a wide margin, which makes this scenario a pure fantasy.
But it could reach $1 if that supply figure shrank significantly. The Shiba Inu community is encouraging its enthusiasts to burn some of their tokens, which means removing them from circulation forever. They can do this by simply sending them to a dead wallet, where they'll never see the light of day again, but there are other, more entertaining ways, too.
They can use the Shiba search engine, which is like Alphabet's (GOOGL -1.97%) (GOOG -1.96%) Google search, and when it generates advertising revenue, the money is used to burn Shiba Inu tokens. They can also watch videos on the Shiba Burn Tube YouTube channel, where ad dollars are again used to facilitate burning.
But here's the challenge
Assuming Shiba Inu's current market valuation of $5.2 billion remained constant, the community would have to burn 99.9998% of all tokens in circulation and leave just 5.2 billion remaining, to organically lift the price per token to $1.
That means roughly 589 trillion would have to be burned. The 2022 numbers are officially in, and the community only succeeded in eliminating 83 billion tokens for the year.
At that pace, it would take more than 7,100 years to achieve the goal. On a positive note, that's a little sooner than one of my previous predictions of more than 10,000 years.
But the bottom line is this: Not only will Shiba Inu fail to reach $1 in 2023, but it's also unlikely to get there in our lifetime. Not to mention, given its market valuation would remain the same under this scenario, investors won't see an increase in the value of their holdings even if it does happen!
