This has been a great year for cryptocurrencies, especially for those on the smaller, more speculative side of the market. Market leader Bitcoin is up over 130%, while the meme token Shiba Inu (CRYPTO: SHIB) has increased by more than 180%.
However, Shiba Inu is still trading 65% below its all-time high, which was set in 2021. It delivered a spectacular return of 45,278,000% that year, which would have been enough to turn a $3 investment into over $1 million. Unfortunately, the speculative frenzy that caused the rally disappeared as quickly as it began.
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But now that Shiba Inu has regained some momentum, could 2025 be the year the price rises to $1 from the current price of $0.00003? The answer might make your head spin.
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 industry-wide failures contributed to the collapse, culminating in the collapse of the economy FTX crypto exchange.
Regulators have successfully prosecuted several bad actors, helping 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 offer financial advisors and institutional investors 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 reached a new record high of $3.8 trillion. Bitcoin is responsible for about $2 trillion of that value, and investors have come to terms with it as a true store of value, akin to digital gold. However, despite making big gains this year, many of the smaller tokens on the market (like Shiba Inu) are still missing the fundamentals.
Only 1,047 companies 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 is also not a good store of value (as the price is still well below its all-time high), the token remains nothing more than a vessel for speculators.
The crypto community has tried to create new applications to strengthen the value of the coin, but so far no one has really changed anything. Developers have even launched Shibarium, a Layer-2 blockchain solution designed to remove some of the clunkiness and cost from the old version Ethereum network on which Shiba Inu is built. In theory, paying with Shiba Inu should now be much easier, but that has not stimulated consumers and companies.
Perhaps the biggest roadblock to Shiba Inu hitting $1 is the sheer supply. At the time of writing there are 589.3 trillion tokens in circulation. At the current token price, Shiba Inu has a market capitalization of approximately $18 billion.
Simple math suggests that at a price of $1 per token, the 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 of Shiba Inu rising to $1 per token as things currently stand.
However, the community is trying to reduce supply by burning tokens, which means removing them from circulation forever. The easiest way for investors to participate is to send their tokens to a dead wallet, where they can never be retrieved. In theory, the price of Shiba Inu should increase organically in proportion to the number of tokens burned.
Based on Shiba Inu’s current market cap, investors will need to burn 99.99998% of its tokens to drive the price per token to $1. So almost all of the 589.3 trillion tokens currently in circulation must disappear, leaving only 18 billion.
Only 3.7 billion tokens were burned last month. If that pace continues, about 44 billion will be burned by 2025, which won’t be nearly enough to take Shiba Inu to $1 per token next year.
Here’s the mind-blowing part: At the current rate, 13,271 are needed years to burn all 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 does not create any value; it simply reduces the supply, causing it to be met corpses as if the value of each token is higher because it is trading at a higher price.
Therefore, in 13,271 years, you would have 99.99998% fewer tokens, with the rest 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 positions in the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
Can Shiba Inu Reach $1 by 2025? The answer may surprise you. was originally published by The Motley Fool
