After a brutal year-long bear market, it looks like crypto may have turned a corner. The total crypto market cap has nearly doubled in 2023, adding much-needed optimism that seemed all but gone in the crypto winter.
With exuberance back in full swing, many investors might wonder if Shiba Inu (SHIB 1.81%) can ride this momentum and return to its previous all-time high, or potentially soar to new heights, like maybe $1.
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The meme coin gets a makeover
Shiba Inu arrived on the crypto scene as the self-proclaimed Dogecoin killer. Since its launch in 2020, it has surged a remarkable 600,000%, good enough to make it the 16th most valuable cryptocurrency on the market.
Although Shiba Inu is still considered a meme coin, its community and developers are doing everything possible to change this perception. Over the last year, Shiba Inu has assumed new functionality that many of the more popular and valuable cryptocurrencies possess.
Today, Shiba Inu holders can utilize the token to yield farm, purchase non-fungible tokens (NFTs), and participate in decentralized borrowing and lending protocols. There are even plans to launch a Shiba Inu-based metaverse. However, while these new endeavors are innovative, they will likely prove to be too little, too late.
Reaching the $1 mark
In the world of cryptocurrencies, supply and demand dynamics play a crucial role in determining a token’s value. Basic logic assumes that the more use cases a cryptocurrency provides, the more demand there will be. Now, this is an extreme generalization, but it highlights how other cryptocurrencies like Bitcoin and Ethereum have risen to such high valuations. Both provide unique use cases that create demand, plus they have built-in mechanisms that limit their supply. Add it all up and the two are now the most valuable cryptocurrencies on the market.
But when it comes to Shiba Inu, even its new functionality won’t be able to stimulate enough demand to help it reach the $1 mark due to one crucial flaw — its massive token supply. At last count, a staggering 589.32 trillion Shiba tokens were in circulation.
For it to reach a valuation of $1 per token, it would need to increase its market cap by an astounding 9,816,570%. Should it accomplish this feat, that means Shiba Inu would be worth more than the total world economy. Something tells me there is no way this will ever happen.
Warranted caution
While Shiba Inu’s decentralized finance makeover and similar initiatives within the Shiba ecosystem might attract a portion of the crypto community, they haven’t proven influential enough to sway broader market sentiment. Unlike some of its peers with clear utility and substantial use cases, recognition that Shiba Inu’s primary appeal is solely in its meme status and potential for pure speculation is solidifying. Evidence of this can be seen when comparing its performance relative to the crypto market. As other cryptocurrencies skyrocketed in 2023, Shiba Inu is up a measly 25%.
Although the community is undoubtedly passionate, the sheer volume of tokens poses a monumental and near inconceivable economic challenge for Shiba Inu. Achieving a value of $1 per token would mean surpassing the market cap of not only every other cryptocurrency, but also becoming the most valuable asset on the planet. While Shiba Inu’s rise has been impressive, achieving the $1 milestone might require more than just meme magic.
RJ Fulton has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
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