This has been a great year for cryptocurrencies, especially for those at the smaller, more speculative end of the market. Industry-leader Bitcoin is up more than 130%, while the meme token Shiba Inu(CRYPTO: SHIB) has soared by more than 180%.
However, Shiba Inu is still trading 65% below its all-time high, which was set during 2021. It delivered a spectacular return of 45,278,000% that year, which would have been enough to turn an investment of $3 into more than $1 million. Unfortunately, the speculative frenzy that drove the rally fizzled out as quickly as it started.
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But now that Shiba Inu has regained some momentum, could 2025 be the year it soars to $1 from its current price of $0.00003? The answer might leave your head spinning.
The cryptocurrency industry entered a bear market in 2022. The total value of all coins and tokens in circulation fell to $821 billion, down from a record high of $3 trillion. An avalanche of failures across the industry contributed to the plunge, headlined by the collapse of the FTX crypto exchange.
Regulators successfully prosecuted several bad actors, which helped investors regain some of their lost confidence. And the Securities and Exchange Commission approved dozens of Bitcoin exchange-traded funds (ETFs) earlier this year, which now provide financial advisors and institutional investors with a safer, more regulated way to invest in the industry’s leading coin.
As a result, the total value of all cryptocurrencies in circulation recently hit a new record high of $3.8 trillion. Bitcoin accounts for about $2 trillion of that value, and investors are warming up to it as a true store of value akin to digital gold. However, despite logging big gains this year, many of the smaller tokens in the market (like Shiba Inu) still lack fundamentals.
A mere 1,047 businesses around the world accept Shiba Inu as payment for goods and services, and many of them are obscure providers of online services, or even gambling websites. If consumers can’t spend their tokens at their favorite stores, they have no reason to own them. Since Shiba Inu isn’t a good store of value, either (given it still trades far below its all-time high), that leaves the token as nothing more than a vessel for speculators.
The crypto’s community has tried to create new uses to shore up the coin’s value, but so far, none have really moved the needle. Developers even launched Shibarium, which is a Layer-2 blockchain solution designed to remove some of the clunkiness and cost from the legacy Ethereum network upon which Shiba Inu is built. In theory, paying with Shiba Inu should now be much easier, but that hasn’t incentivized consumers or businesses.
Image source: Getty Images.
Perhaps the biggest roadblock to Shiba Inu hitting $1 is its enormous supply. As of this writing, there are 589.3 trillion tokens in circulation. At the current token price, Shiba Inu has a market capitalization of about $18 billion.
Simple math suggests that at a price of $1 per token, its market cap would be $589.3 trillion. That’s more than the total wealth of every person on Earth, which stood at $454 trillion at the end of 2022, according to UBS. In other words, there is absolutely no chance Shiba Inu rises to $1 per token as things currently stand.
However, its community is trying to shrink supply by burning tokens, which means removing them from circulation forever. The easiest way for investors to participate is by sending their tokens to a dead wallet, where they can never be retrieved. In theory, Shiba Inu’s price should rise organically in proportion to the number of tokens that are burned.
Based on Shiba Inu’s current market cap, investors will have to burn 99.99998% of its tokens in order to send the price per token to $1. So almost all of the 589.3 trillion tokens currently in circulation must disappear, leaving just 18 billion remaining.
Only 3.7 billion tokens were burned in the past month. If that pace continues, about 44 billion will be burned during 2025, which won’t be anywhere near enough to take Shiba Inu to $1 per token next year.
Here’s the mind-blowing part: At the current pace, it will take 13,271 years to burn all of the necessary Shiba Inu tokens!
And it gets worse. Even if you lived to see that day, you wouldn’t make any money. Burning tokens doesn’t create any value; it simply reduces supply, which makes it seem like the value of each token is higher because it trades at a higher price.
Therefore, 13,271 years from now, you would have 99.99998% fewer tokens, with the remainder worth $1 each. Shiba Inu’s market cap would still be $18 billion, and your net position would be exactly the same as it is today.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
