Of all the meme tokens in the cryptocurrency sector, Shiba Inu (SHIB +2.20%) is perhaps the most closely watched digital asset on my watch list.
CRYPTO: SHIB
Key Data Points
Why?
Well, Shiba Inu is clearly one of the most volatile tokens in the market. Over the course of the past weekend (since 4 p.m. on Friday), Shiba Inu has declined 8.6% to 6 p.m. ET on Monday.
That said, this heightened volatility is even more significant when we zoom out. Since Shiba Inu's most recent peak in December of last year, this meme token has seen a decline of more than 75%.
Let's dive into what's spooking investors in this top dog-inspired cryptocurrency, and whether an investment case can be made for this token in this challenging macro climate for speculative risk assets.
Catalysts aren't turning into big gains, like the old days
Source: Getty Images.
I think one of the more interesting aspects of the recent year-long decline in Shiba Inu's market capitalization is that there were a number of notable catalysts that traders and speculators in Shiba Inu may have thought would bring about massive gains.
The Shiba Inu team has discussed plans in detail to reduce the number of outstanding tokens through token burns over time. According to Shibburn, a site that tracks the aggregate total of all prior token burns, more than 400 billion SHIB tokens have been burned since inception. Given the fact that the current circulating supply of this meme token sits just shy of 590 trillion tokens, that's around 0.1% of the total supply. Suffice it to say, some bears have been correct in assuming that token burns would not increase to the degree many bulls expected. However, a recent burn of 30 million tokens by one wallet address over the past day would normally have been enough to induce a price spike, at least in years past.
Another teaser posted this past weekend, suggesting a new addition to the Shiba Inu network could be coming, has also done little to move this token's price. For now, macro conditions and concerns around the valuations of not only meme tokens, but other high-quality tech companies, continue to drive Shiba Inu's price action.
If Shiba Inu were a sentiment gauge (and I'd argue it is), extreme fear does appear to be circulating among crypto investors right now. Until this dynamic changes, I believe the risk-reward profile of this meme token will remain tilted to the downside.
