An anonymous developer used the pseudonym Ryoshi to launch a highly speculative cryptocurrency called Shiba Inu (SHIB +4.39%) in 2020, after observing how enthusiastically investors were piling into a similar token called Dogecoin. In 2021, Shiba Inu delivered a return of 45,278,000%, which remains one of the best annual gains by any asset in history. It would have been enough to turn a perfectly timed investment of $3 into $1 million.
Market conditions were perfect for Shiba Inu to succeed then. Interest rates were at historic lows, and the U.S. government was pumping trillions of dollars into the economy to offset the negative effects of the COVID-19 pandemic. This drove a speculative frenzy that infected everything from stocks to real estate to cryptocurrencies.
But speculative frenzies never last, and Shiba Inu had lost more than 90% of its peak value by mid-2022. It's currently trading at the lowest level in five years, but could 2026 be the year it stages another historic rally and potentially reaches $1 from its current price of $0.000006? The answer will blow your mind.
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Shiba Inu needs to find a sustainable source of demand
The key to creating value for any cryptocurrency is to find a consistent source of demand. If it's popular as a payment method, for example, its value will typically grow in line with the number of businesses and consumers who regularly use it. Unfortunately, Shiba Inu hasn't succeeded in attracting that kind of adoption.
As a speculative cryptocurrency, Shiba Inu is highly volatile, which would make cash-flow management a nightmare for any business. Plus, it's an inefficient payment mechanism because it's built on the legacy Ethereum network, which struggles to handle high transaction volumes without a dramatic increase in fees (or "gas").
Developers built a Layer-2 blockchain solution for Shiba Inu called Shibarium, which bypasses some of Ethereum's constraints, but it hasn't moved the needle in terms of adoption. In fact, just 1,130 businesses worldwide are willing to accept the token as payment as I write this (according to crypto directory Cryptwerk).
Efforts to come up with other use cases have also fallen flat. Developers built a virtual metaverse for Shiba Inu enthusiasts, where they can exchange tokens for digital plots of land and other novelties. However, based on the token's rock-bottom price today, it hasn't created much (if any) value.
CRYPTO: SHIB
Key Data Points
$1 per token might be impossible as things stand
Aside from Shiba Inu's lack of adoption, its supply issue could be another barrier to reaching the $1 milestone. There are 589.2 trillion tokens in circulation, so at the current price of $0.000006 per token, Shiba Inu has a market capitalization of $3.6 billion. Simple math dictates that a price-per-token of $1 would result in a market cap of $589.2 trillion, which is simply unrealistic.
For some perspective, the largest company in the world (Nvidia) is worth just $4.8 trillion. The total value of all above-ground gold reserves is around $36 trillion. Finally, the International Monetary Fund estimates that the output of the entire global economy will be $123.6 trillion in 2026.
Therefore, I can confidently say that achieving a price of $1 per token is impossible as things stand. But the community is trying to solve the supply issue by "burning" tokens, which involves sending them to a dead wallet where they can never be retrieved. In theory, if enough tokens are removed from circulation, the price of each remaining token should rise by a proportionate amount.
Burning enough tokens will take a mind-blowing amount of time
If Shiba Inu's circulating supply of 589.2 trillion tokens shrank by 99.99998% to just 3.6 billion tokens, that would theoretically result in a price-per-token of $1. Why? Because a supply of 3.6 billion tokens multiplied by $1 equals a market cap of $3.6 billion, exactly matching Shiba Inu's current market cap.
Last month, around 102.5 million tokens were burned, which is an annualized rate of 1.23 billion. At this rate, it will take a staggering 479,000 years to burn enough tokens to justify a price of $1, so none of us will be here when it happens.
But there's another issue: This particular route to $1 won't create any value. Each investor would have 99.99998% fewer tokens, so even though each remaining token is worth $1, their net financial position would be exactly the same as it is today.
Believe it or not, this gets worse. Even if an investor passed their tokens down through the generations, the inheritance would be worth far less than it is today after 479 millennia worth of inflation.
