The total value of all cryptocurrencies in circulation hit an all-time high of $3.9 trillion in December, thanks mostly to solid gains in Bitcoin (BTC 0.82%), which makes up more than half of that value on its own.
Bitcoin is one of the only major cryptocurrencies that has recently set a new record high -- Ethereum, XRP, Dogecoin, and Shiba Inu (SHIB +1.00%) are still trading below their best-ever levels from several years ago.
Shiba Inu is one of the most interesting stories. It remains 81% below its peak from 2021, which is the year it delivered one of the best returns in the history of financial markets. It soared by 45,278,000% between Jan. 1 and Dec. 31, 2024, which would have been enough to turn an investment of just $3 into over $1 million.
Shiba Inu currently trades at $0.000015 per token, but could it stage another historic run and potentially reach $1? Read on to learn about the $589 trillion hurdle standing in the way.
CRYPTO: SHIB
Key Data Points
Shiba Inu failed the adoption test
Before we dive into the $589 trillion problem, it's important to understand why Shiba Inu has plunged by 81% from its all-time high, while Bitcoin continues to set new records. Both cryptocurrencies are speculative assets, meaning they don't produce earnings, so investors buy them simply hoping someone will pay a higher price in the future. However, Bitcoin has found a use case, whereas Shiba Inu has not.
A growing number of investors view Bitcoin as a legitimate store of value, which was somewhat legitimized when the U.S. Securities and Exchange Commission approved dozens of exchange-traded funds (ETFs) last year. It opened the door to allow financial advisors and institutional investors to buy Bitcoin in a safe and regulated way, whereas they might have been restricted from owning it previously due to the risks involved (digital wallets can be hacked).
It's unlikely Shiba Inu will ever win the confidence of investors in the same way. Besides its significant volatility, Shiba Inu doesn't have its own blockchain (it relies on the legacy Ethereum network), and its developers still have a high level of influence over which projects are launched to help create value.
Therefore, even though Shiba Inu is technically decentralized, it isn't quite as decentralized as Bitcoin, which runs on its own blockchain and operates independently of any person or community.
Shiba Inu hasn't had much luck as currency, either. Only 943 businesses worldwide are willing to accept it as payment for goods and services (according to Cryptwerk). Many of them are obscure providers of internet and crypto services, and even online casinos. Becoming a widely adopted payment mechanism would be one way for Shiba Inu to create sustainable value over the long term, but it might not be in the cards due to the token's extreme volatility.
The $589 trillion problem
The reason Shiba Inu trades at such a tiny price of $0.000015 per token is because of its enormous supply. There are 589.25 trillion tokens in circulation (compared to just 19.8 million Bitcoin), so even at its current price, it still has a sizable market capitalization of $9.3 billion.
Simple math dictates that a price-per-token of $1, multiplied by its supply of 589.25 trillion tokens, would give Shiba Inu a market capitalization of $589.25 trillion. To give you an idea of how ridiculous that is, a report by UBS suggests that the total wealth held by every person, business, and government on Earth amounted to just $454 trillion in 2022.
It would also make Shiba Inu 34 times more valuable than the combined market cap of the "Magnificent Seven" technology giants, which currently stands at $17.3 trillion. In other words, there is absolutely no way Shiba Inu can reach $1 in its current state.
However, the community is trying to rectify Shiba Inu's supply problem by "burning" tokens, which means to remove them from circulation. The simplest way to participate is by sending tokens to a dead wallet where they can never be retrieved, but progress has been slow so far.
Image source: Getty Images.
It could take 40,000 years to burn enough Shiba Inu tokens
Typically, a cryptocurrency's price will rise in proportion to the number of tokens burned. Therefore, if the community burned 99.99998% of all Shiba Inu tokens in circulation to leave just 9.3 billion remaining (matching Shiba Inu's current market cap), that should, theoretically, result in a price of $1 per token.
Burning 589.24 trillion tokens would require the participation of practically every current investor, but it appears most aren't getting involved. Only 1.2 billion tokens were burned in January, translating to an annualized rate of 14.4 billion. At that pace, it would take an eye-popping 40,919 years to burn all of the required tokens!
But remember, burning tokens doesn't create any value. Even if you lived long enough to see that day, you would simply have 99.99998% fewer tokens which are priced at $1 each, leaving your net financial position exactly the same as it was before.
The only thing that will drive the actual value of Shiba Inu higher is a legitimate use case. Unfortunately, it doesn't appear close to finding one, so investors should be very careful about chasing its price higher if there is another speculative run.
