More than doubling in 2023, it looks like the cryptocurrency asset class has officially emerged from the brutal crypto winter. With renewed optimism and the hopes of a bull market looming, it's time to check on one of the top performers from the crypto market's last bull run: Shiba Inu (SHIB -0.74%).
When seemingly every cryptocurrency was making monumental gains in 2021, Shiba Inu came out of nowhere and took the crown. Growing by more than 28,000,000%, the meme coin is now the 19th-most valuable cryptocurrency in the world. The next landmark in Shiba Inu's sights is the coveted $1 mark. But can it do it?
Shiba Inu gets a makeover
Several factors influence cryptocurrency prices, but there is no fixed formula for determining them. The most common belief is that a cryptocurrency's value is directly proportional to its demand, which often arises from the innovative ways the currency can be used by its holders.
Additionally, since this is crypto, speculation also plays a significant role. During the previous bull market, Shiba Inu's price surge was driven by pure speculation, as it didn't offer any unique features or use cases compared to other cryptocurrencies on the market.
Recognizing the token's inadequacy, over the last two years Shiba Inu's developers have undertaken the monumental task of trying to increase its utility. In doing so, they hope that Shiba Inu will shed its meme coin status and be taken a bit more seriously.
Surprisingly, significant progress has been made. Today, Shiba Inu holders can utilize the token similarly to some of the top cryptocurrencies on the market. Thanks to its makeover, Shiba Inu can be used for yield farming, buying and selling non-fungible tokens (NFTs), and several other applications that are part of the decentralized finance (DeFi) economy. There are even ambitious plans to launch a Shiba Inu-based metaverse.
Inducing artificial value
Shiba Inu has come a long way. Its loyal community and dedicated developers are doing all they can to turn over a new leaf. However, there is one glaring problem -- its monumental supply.
As of Feb. 7, more than 589,281,128,753,700 Shiba Inu tokens were in circulation. As part of Shiba Inu's revamp, a burn mechanism was introduced to try to reel in its massive supply. While the technicalities of how it works are a conversation for another day, it's becoming clear that the burn isn't having its intended effect.
While it might be hard to believe, Shiba Inu originally had a total supply of 1 quadrillion tokens. But since the burn mechanism launched in April 2022, more than 410 trillion tokens have been removed, or roughly 41% of the previous supply.
For almost any other cryptocurrency, a 41% reduction in supply would likely produce significant price appreciation. But this hasn't happened for Shiba Inu. In fact, since the burn was initiated, Shiba Inu has lost market share.
An insurmountable obstacle
Shiba Inu's massive supply makes the prospect of $1 virtually impossible. To do so, the token would need to increase by an astounding 9,816,570%. While Shiba Inu has made jumps like this before, getting a leg up of this size would be much more unlikely. If it were to reach a price of $1 per token, it would not only become the most valuable cryptocurrency but end up being worth more than the entire world economy.
Reaching $1 would be like defying gravity. It just can't happen. No matter how explosive the next bull market might be, there is no chance Shiba Inu will hit $1. By just about every measure, this dog may have seen its last day.