Crypto Comeback: Can Shiba Inu Reach $1?

The stock market has been trending lower this year, but it’s not quite as beaten up as the cryptocurrency market. In November 2021, the accumulated value of all existing crypto-tokens topped $2.9 trillion, but just a few months ago, the figure hit a low of $860 billion.

A broad recovery appears to be in motion, with the market leader Bitcoin (CRYPTO: BTC) is now trading at $24,371, or about 38% of its 2022 low.

But the meme token Shiba Inu (SHIB -0.54%), which stole the limelight from other cryptocurrencies in 2021 with a whopping 43,800,000% return, has tripled from its 2022 low price of $0.000006 to trade at $0.000018 at the time of writing. But is it on track to many investors’ long-term goal of $1?

Image source: Getty Images.

Cryptocurrency markets are facing increased scrutiny

Concerns about the cryptocurrency industry have grown during 2022, which is one of the reasons for its broad decline in value. It’s not just government regulators asking the hard questions anymore, but also consumers amid a handful of spectacular failures this year that have left catastrophic losses in their wake.

The collapse of popular stablecoin TerraUSD (CRYPTO: USTC) was one of the most notable, wiping out almost all of its peak value of $18 billion. Then in July, decentralized cryptocurrency lender Celsius filed for bankruptcy, owing its users roughly $4.7 billion. In the same month, Voyager went under after making loans to crypto hedge funds such as Three Arrows, which failed in part because that entity lost a large stake in the TerraUSD stablecoin.

Now, it appears that US government agencies are taking a far more proactive approach to regulating the crypto industry. There is a wave of new rules to come through to better protect consumers. Many crypto-tokens are likely to be classified as securities going forward, giving them strict guidelines on how they are offered, sold and traded. The exchanges and brokerage firms that trade these tokens must also comply with new auditing and compliance standards.

A token will be classified as a security if it passes the Howey test, which dates back to a 1946 Supreme Court decision defining investment contracts. Simply put, if investors pool their money in a project by buying shares, contracts or in this case tokens, with a clear expectation of making money, then the financial instrument is likely to be a security in the eyes of the law. It seems the Shiba Inu would fit that bill, at least at face value.

The Shiba Inu supply continues to burn

Beyond an overhaul of the regulatory framework surrounding cryptocurrencies, the Shiba Inu has a unique problem standing in the way of further stratospheric gains like the 2021 performance. There are currently 589 trillion Shiba Inu tokens in circulation, meaning that if the price per token reached $1, it would make the Shiba Inu the most valuable asset on Earth by a wide margin. In other words, it’s never going to happen.

To clear a more realistic path to $1, the community is working together to burn tokens, meaning removing them from circulation forever. There are a handful of ways to do this, including participating in the new Shiba Inu metaverse where virtual landowners can give a unique name to their lots 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 some of the profits. But the easiest way to burn tokens is by sending them to a dead wallet, where they will remain inaccessible forever.

But there is a catch… or two

The math behind the burning 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 achieve a price of $1, approximately 99.9998% of tokens must be burned.

At today’s daily burning rate, I have previously pointed out that it would take over 10,000 years to get there. But there is only one problem. The other catch is that if Shiba Inu reaches $1, it won’t change the underlying value of each investor’s position – it simply means that each investor will have 99.9998% fewer tokens, each worth $1, mathematically leaving them in exactly same position as before the pulp burn.

There is only one way to actually make the Shiba Inu more valuable, and that is to come up with use cases for the token that will lead to widespread adoption among consumers and businesses. Right now, only 659 mostly obscure sellers accept Shiba Inu as payment worldwide, and that’s not enough to move the needle.

Unfortunately, the dream scenario of $1 per token still seems to be out of reach for Shiba Inu investors at the moment.