Tno question Shiba Inu (CRYPTO: SHIB) had an incredible run in 2021.
The dog-themed cryptocurrency surged from $0.000000000133 (nine zeros) in late 2020 to $0.000033 (four zeros) in late 2021, surging around 26,000,000% as major cryptocurrency exchanges allowed trading of SHIB and meme- Coins remained popular after earlier surge of Dogecoins (CRYPTO:DOGE).
After the meme coin shed five decimal zeros from its price, some are calling for the coin to eventually reach $1. From its current price of $0.000021, that would mean a gain of about 4,700,000%. Given how far Shiba Inu has come, it might seem realistic for the coin to gain another 4,700,000%, but basic math gets in the way.
Shiba Inu is traded for such a small fraction of a penny because its supply is so great. There are currently 549 trillion SHIB tokens in circulation, giving it a market cap of around $11 billion. If these tokens were worth $1 each, SHIB’s market cap would be $549 trillion, which would be roughly 200 times larger than Applethe world’s most valuable company and more than six times the world’s annual GDP.
In other words, Shiba Inu hitting $1 would likely require a massive reshuffle of the global economy. That will not happen. However, there is a caveat.
Image source: Getty Images.
This is the only way SHIB can reach $1
There are two ways to increase the value of Shiba Inu. One is that traders simply increase the price. On the other hand, the supply should decrease, which should make the remaining coins more valuable. To do this, the coins must be taken out of circulation or burned, as traders commonly call it, by transferring them to dead wallets.
It is not uncommon for this to happen. In fact, according to Shibburn, a website that tracks Shiba Inu coin burning, 410 trillion Shiba Inu coins have already been burned. Almost all of these coins were phased out by Vitalik Buterin, the co-founder of ether (CRYPT: ETH) who was gifted half of the 1 quadrillion Shiba Inu coin supply by the anonymous Shiba Inu founder. Buterin did so because he was uncomfortable controlling so much of the cryptocurrency supply.
According to Shibburn, at the time of writing, 62 million Shiba Inu coins have been burned in the last 24 hours. While that may sound like a lot, at this rate it would take just over two weeks to burn 1 billion coins and 40 years to burn 1 trillion coins. The burn could accelerate if there were an organized movement among SHIB holders that could gather momentum if SHIB’s value continues to fall. However, there is a clear disincentive to burning the coins. When the value starts to rise, it is in holders’ interest to keep their coins rather than burn them, and the decentralized nature of cryptocurrency makes it unlikely that there will be an organized movement strong enough to handle the numbers of coins to reduce significantly.
What’s next for Shiba Inu
Since peaking at $0.88 in late October, Shiba Inu has lost more than 75% of its value, and other cryptocurrencies have also fallen sharply. Bitcoin (CRYPT: BTC) is almost 50% below its all-time high, as is Ethereum. Cryptocurrencies have fallen amid broader jitters in stock markets over rising interest rates.
It’s impossible to predict where the cryptocurrency market will go next, but the most inflated assets during the pandemic have already fallen sharply.
At this point, another Shiba Inu rally seems unlikely and reaching $1 is next to impossible.
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Jeremy Bowman owns Ethereum. The Motley Fool owns shares of and recommends Apple, Bitcoin, and Ethereum. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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