Cryptocurrency token Shiba Inu (SHIB 0.85%) delivered a return of more than 43,000,000% in 2021. It was one of the greatest gains in the history of financial markets, and it would have been enough to turn a perfectly timed investment of $3 into more than $1 million.
But the token has since plummeted 89% from its all-time high. A couple of things have contributed to the weakness: Shiba Inu has failed to gain traction as a payment mechanism, and investor sentiment toward speculative cryptocurrencies deteriorated starting in 2022.
However, the tide appears to be turning for the better in the crypto industry. Bitcoin is up 23% in 2024 already, and the total value of all crypto in existence has reached $2 trillion for the first time in almost two years.
So can Shiba Inu ride the bullish wave to deliver more gains? Theoretically, it could soar from its current price of $0.0000098 all the way to $1 -- but it might not lead to life-changing fortunes for investors. Here's why.
CRYPTO: SHIB
Key Data Points
Crypto sentiment is on the rise
Cryptocurrency fever peaked in 2021 when the total value of all tokens hit nearly $3 trillion. But it all fell apart in 2022 when some of the most prominent crypto experiments imploded.
The TerraUSD stablecoin de-pegged, wiping out an estimated $60 billion in value for investors in the process. Then one of the world's leading crypto exchanges, FTX, collapsed in a mess of fraud and deception that led to the conviction of its founder. By the end of 2022, the crypto industry was worth a mere $830 billion.
A modest recovery started in 2023, but soaring interest rates capped investors' appetite for risk. Nevertheless, leading coins like Bitcoin and Ethereum carried some positive momentum into 2024, and they are slowly trending toward their all-time highs.
The speculative end of the market -- where Shiba Inu lives -- remains subdued. Meme-tokens delivered losses so steep over the past couple of years that investors are still hesitant to buy. Unfortunately, Shiba Inu isn't giving them much reason for optimism; it hasn't generated any traction as a payment mechanism, and a mere 917 merchants around the world accept it in exchange for goods and services.
If speculative investors aren't convinced Shiba Inu will move higher, and consumers aren't adopting it, it will be hard to create or sustain any value over the long term.
The $589 trillion problem
Investors might finally be wising up to the main problem plaguing Shiba Inu: There are 589.3 trillion tokens in circulation, which is why it trades at a somewhat unconventional price point of $0.0000098. Even though it's lightyears away from trading at one cent ($0.01), let alone $1, the total value of all 589.3 trillion tokens at the current price is $5.8 billion.
Simple math dictates that if Shiba Inu did rise to $1, it would give the ecosystem a market capitalization of a whopping $589.3 trillion. For context:
- Microsoft is the largest company in the world, and it's valued at just $3 trillion.
- U.S. gross domestic product (GDP) in 2023 was $27.9 trillion.
- Global wealth -- all of the cash and assets held by households, corporations, and governments all over the world -- stood at $454 trillion in 2022.
So at $1 per token, Shiba Inu would be worth more than the total value of all of the recorded wealth on Earth. In other words, $1 is a pipe dream for investors in the current circumstances.
However, the Shiba Inu community is currently "burning" tokens, which means removing them from the supply forever. The easiest way to participate is to send tokens to a dead wallet where they can never be retrieved. But enthusiasts have also created platforms like the Shiba Search internet search engine, which uses advertising revenue to buy Shiba Inu tokens to burn them. Similarly, there is also a music playlist people can stream that uses the royalties for the same purpose.
Theoretically, burning enough tokens will push Shiba Inu to $1 organically -- as supply shrinks, the price per token has to rise in order to maintain a constant market capitalization.
Image source: Getty Images.
Those gains might not translate into profits for investors
Based on Shiba Inu's current market cap of $5.8 billion, supply would have to fall to 5.8 billion tokens to organically lift the price per token to $1. In other words, roughly 99.99998% of the 589.3 trillion tokens now in supply would have to be burned.
About 353 million Shiba Inu tokens have been burned during the past month. That translates to 4.2 billion tokens over the course of one year. At that pace, it would take 140,300 years to burn enough tokens to warrant a price of $1 -- so 2024 is probably off the table.
Here's the kicker. It wouldn't even result in a profit for investors. In order to burn that many tokens, practically every person holding Shiba Inu tokens would have to participate. By the end, they would be holding 99.99998% fewer tokens, and even though the tokens that remain are worth $1 each, the total value of their position won't have changed.
Overcoming Shiba Inu's supply problem is a gargantuan task, and it won't mean much in the end. The only way to drive the token's actual value higher is to give investors and consumers a genuine reason to own it, and that doesn't appear to be happening.
