But the Shiba Inu meme token (SHIB 1.57%), which stole the show from other crypto-currencies in 2021 with an impressive 43,800,000% return, has tripled since its 2022 low of $0.000006 to trade at $0.000018. But is it on track to reach many investors’ long-term goal of $1?
Crypto-currency markets come under increased scrutiny
Concerns about the crypto-currency industry have increased over the course of 2022, which is part of the reason for the widespread decline in its value. It’s no longer just government regulators asking the tough questions, but also consumers amidst a handful of spectacular failures this year that have left catastrophic losses in their wake.
The collapse of stablecoin TerraUSD was one of the most notable, wiping out nearly all of its $18 billion peak value. Then, in July, decentralized crypto-currency lender Celsius filed for bankruptcy, owing about $4.7 billion to its users. That same month, Voyager went bankrupt after making loans to crypto-currency hedge funds like Three Arrows, which failed in part because that entity lost a big bet on the stablecoin TerraUSD.
Now, U.S. government agencies seem to be taking a much more proactive approach to regulating the crypto industry. A wave of new rules is about to emerge to better protect consumers. Many crypto tokens will likely be classified as securities in the future, subjecting them to strict guidelines on how they are offered, sold and traded. Exchanges and brokerage firms that handle these tokens will also have to comply with new audit and compliance standards.
A token would be classified as a security if it passes the Howey test, which dates back to a 1946 Supreme Court decision defining investment contracts. In other words, if investors pool their money in a project by purchasing shares, contracts or, in this case, tokens, with the clear expectation of making a profit, it is likely that the financial instrument is a security in the eyes of the law. It appears that Shiba Inu meets this definition, at least at face value.
Shiba Inu offering continues to burn
Beyond an overhaul of the crypto-currency regulatory framework, Shiba Inu faces a unique problem that prevents it from achieving stratospheric gains similar to 2021. There are currently 589 trillion Shiba Inu tokens in circulation, which means that if the price per token reached $1, it would make Shiba Inu the most valuable asset on Earth by far. In other words, it will never happen.
To pave a more realistic path to $1, the community is working together to burn the tokens, which means taking them out of circulation forever. There are several ways to do this, including participating in the new Shiba Inu metaverse, where virtual landowners can assign a unique name to their plots in exchange for a fee paid in Shiba Inu tokens, all of which will be burned.
Enthusiasts can also help by listening to a specific music playlist, or even by buying coffee from the Shiba Coffee Company, which burns a portion of its profits. But the easiest way to burn tokens is to send them to a dead wallet, where they will remain inaccessible forever.
But there’s a catch… or two.
The math behind the burn strategy is simple. If 90% of the 589 trillion Shiba Inu tokens in circulation are burned, the price per token will organically increase tenfold (in theory). Therefore, to reach a price of $1, about 99.9998% of the tokens would have to be burned.
At the present rate of daily burning, it would take more than 10,000 years to achieve this. But that’s only one problem. The other problem is that if Shiba Inu reaches $1, it won’t change the underlying value of each investor’s position – it just means that each investor will have 99.9998% fewer chips, each worth $1, leaving them mathematically in the same position as before the massive burn.
There is only one way to increase the value of Shiba Inu, and that is to find use cases for the token that will lead to widespread adoption by consumers and businesses. Currently, only 659 mostly obscure merchants accept Shiba Inu as a form of payment worldwide, and that’s not enough to get things moving.
Unfortunately, it seems that the dream scenario of one dollar per token remains out of reach for Shiba Inu investors for now.