shiba inus (SHIB -3.75%) has become a symbol of life-changing wealth. Fueled by brilliant branding and viral marketing, the meme token has seen its value increase by over 42,000,000% in 2021. At this rate, if you had invested $5 on New Years Day 2021, you would have was a multi-millionaire at Christmas. Unfortunately, the price has since fallen 75% from its peak.
Despite this setback, many in the Shiba Inu community remain optimistic. Some analysts have even hit the token meme with price targets exceeding $1. That’s a long chance to say the least, given that the price is now around $0.0000224, but it’s possible that Shiba Inu will hit that mark.
Here’s what it would take.
The scaling solution
Shiba Inu is an ERC-20 token, a type of smart contract built on the Ethereum blockchain. For this reason, transactions within the Shiba Inu ecosystem are subject to the same exorbitant fees as other transactions on the Ethereum network. For context, the average fee currently sits at $14, but it peaked at nearly $70 last year. This is where Shibarium will make the difference.
Shibarium is a Layer 2 scaling solution that will move Shiba Inu transactions to another platform, accelerating throughput and reducing fees. The launch has not been finalized, but it could take place as early as mid-2022. This has big implications for other Shiba Inu projects, including ShibaSwap 2.0 and the Shiba Inu Metaverse.
Other projects in preparation
The Shiba Inu Metaverse will allow users to purchase digital plots of land, earn passive income, and build their own projects in a Shiba Inu-themed virtual world. Similarly, ShibaSwap 2.0 is an upgraded version of the ShibaSwap exchange, a decentralized finance (DeFi) platform that allows traders to trade tokens and earn rewards through staking.
These projects thrill Shiba Inu enthusiasts. Both could create demand for the meme token, driving up its price as they feature burning mechanisms designed to reduce Shiba Inu supply. For example, metaverse owners can rename their land plots by burning tokens. Likewise, the developer community is working on a burning portal that will integrate with ShibaSwap 2.0. Details are still lacking, but the burning portal will likely impose transaction fees on the decentralized exchange, and the funds collected from these fees will be sent to a dead wallet, thereby destroying them.
The $1 price target
The circulating supply of Shiba Inu currently sits at 549 trillion tokens. If each token were worth $1, Shiba Inu would have a market capitalization of $549 trillion, which is six times the gross domestic product of all the countries on the planet combined. The only way for Shiba Inu to reach $1 is if a significant portion of the currency is destroyed. To understand how many tokens need to be burned, let’s look at two hypothetical scenarios.
Scenario 1: Projects like Shibarium, Shiba Swap 2.0, and the Shiba Inu metaverse generate so much excitement that the meme token reaches a market cap of $2 trillion. For context, that would make Shiba Inu worth more than Bitcoin at its best, and that would represent a return 150 times higher than its current price. If that happens, each token would be worth $0.00363, which is still well under $1. To make up the difference, 547 trillion tokens (99.6% of the total supply) would need to be burned.
Scenario 2: Projects like Shibarium, ShibaSwap 2.0, and the Shiba Inu metaverse generate no excitement and the meme token maintains its current market cap of $13.3 billion. To achieve a price of $1 per token, 548.99 trillion tokens (99.998% of the circulating supply) would need to be burned.
Here’s the gist: Shiba Inu could hit $1 if burn projects destroy the vast majority of tokens in circulation, but there’s still a catch. If everyone contributes the same number of tokens to burn projects, no one will actually earn any money. The situation is analogous to a reverse stock split, which has no impact on an investor’s stake in the business. In other words, if your investment thesis is built around burning projects, you are effectively betting that other people will burn more tokens than you. But at some point, everyone will come to the same conclusion and people will just stop engaging with token-burning products. For this reason, I doubt Shiba Inu will ever hit the $1 mark. More importantly, I believe there are better cryptocurrencies to buy and hold.