Shiba Inu (SHIB -3.93%) arrived on the crypto scene as the self-proclaimed Dogecoin killer. Since its launch in 2020, it has surged a remarkable 600,000%, which is good enough to make it the 16th most valuable cryptocurrency in December 2023.
Riding the wave of meme coin mania, the SHIB token has garnered attention for its rapid rise and increasing number of use cases. With the broader crypto market in the midst of a monumental rebound, could Shiba Inu be an under-the-radar dark horse of the next crypto bull market or a looming cautionary tale?
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Breaking down the basics
While Shiba Inu shares the meme coin category with Dogecoin and thousands of other cryptocurrencies, one key aspect differentiates SHIB. Shiba Inu technically operates on the Ethereum blockchain. As a result, this strategic configuration gives SHIB smart contract functionality, a luxury Dogecoin and many other meme coins don't possess.
Proponents argue that this feature positions SHIB for long-term success, allowing users to mint non-fungible tokens (NFTs), establish decentralized autonomous organizations (DAOs), and leverage the meme coin in various decentralized finance (DeFi) use cases. In addition, the SHIB Metaverse is penciled in for a partial launch by year-end, adding another layer to its ambitious ecosystem.
Critical pitfalls: A huge supply overload
The additional utility SHIB offers gives it an edge over other meme coins lacking functionality. However, Shiba Inu's recent performance metrics and a closer examination of its structural design suggest caution is in order.
Despite these considerable developments, the SHIB ecosystem faces one glaring pitfall -- an overwhelming token supply. As of the latest count, a staggering 589 trillion SHIB tokens are in circulation. The excessive supply raises red flags, challenging basic economic principles.
Proponents of SHIB often highlight a new burn mechanism that was unveiled in April 2022 as a counter to this argument. The hope is that by artificially lowering the massive token supply, more value will be created. However, less than 0.001% of tokens have been burned this year. At this rate, real value seems like an incredibly long shot.
In a market where demand typically drives prices, SHIB's intentional prioritization of abundance over scarcity contradicts the successful model seen in assets like Bitcoin (CRYPTO: BTC). Bitcoin's capped supply of 21 million has contributed significantly to its long-term value surge. SHIB, with its unconstrained supply, fails to capitalize on this economic principle, leading to severe issues in the long haul.
The reality check
The allure of SHIB as a popular meme coin with the potential for massive returns is undeniable and difficult to ignore. But investors would be better off treading cautiously and acknowledging that Shiba Inu remains a meme coin with minimal long-term prospects.
Recognition of this grim reality seems to be gaining traction across the broader market. While the total crypto market cap is up an astounding 90% this year, Shiba Inu trails behind, posting a lackluster 20% gain.
In contrast to more established counterparts, SHIB lacks the crucial fundamentals necessary for long-term viability. Its structural design, while ambitious, does not translate into concrete utility or value. As investors increasingly recognize the absence of these essential elements, SHIB's challenges become glaringly apparent and should be avoided by investors. Instead, directing attention toward more established options would be prudent.
