Shiba Inu (SHIB 2.57%) entered the cryptocurrency scene with a bang. It generated a return of 45,278,000% in 2021, which remains one of the best annual gains in the history of financial markets -- it would have been enough to turn an investment of just $3 into more than $1 million!
But it proved to be nothing more than a speculative frenzy. By mid-2022, Shiba Inu had fallen more than 90%. It's staging a recovery at the moment with a gain of about 160% this year, but it's still sitting way below its all-time high of $0.000086.
The crypto industry is benefiting from several tailwinds right now, so it's possible Shiba Inu is gearing up for another historic run. Could 2025 be the year it soars from its current price of $0.000028 all the way to $1? There's a big mathematical hurdle standing in the way, and it might leave your head spinning.
Shiba Inu lacks real fundamentals, but it's benefiting from the Trump effect
To be very blunt, Shiba Inu has no real use case. It's widely known as a meme token, so its price often moves up and down on the whims of retail traders and speculators. According to Cryptwerk, just 1,048 merchants around the world accept Shiba Inu as payment for goods and services, and many of them are obscure internet services businesses and online gambling websites.
Without widespread adoption by consumers and businesses, it's very difficult for a currency of any kind to sustain value over the long term. The Shiba Inu community tried to create new use cases in the past for that very reason. In 2021, developers started building a metaverse where investors could spend their tokens to customize virtual plots of land, but it still hasn't launched (and there is currently no guarantee that it will).
In 2023, developers also launched Shibarium, a Layer-2 blockchain solution which eliminates some of the clunkiness from the legacy Ethereum network upon which Shiba Inu is built. Shibarium basically makes it faster and cheaper to transact using Shiba Inu tokens, which, in theory, could drive adoption. However, it hasn't moved the needle yet.
But Donald Trump's recent election win drove a huge shift in sentiment. He was a crypto skeptic for years before warming up to the industry in the lead-up to Election Day to broaden his potential voter base. Now, he's so positive on cryptocurrencies that you could even label him an advocate.
Trump has talked about establishing a strategic Bitcoin reserve within the U.S. government, and he just nominated pro-crypto businessman Paul Atkins to run the Securities and Exchange Commission (SEC). The latter move might be a tailwind for speculative tokens like Shiba Inu, because fewer crypto regulations could pave the way for new use cases, which would create more value.
But there's a $589 trillion problem for Shiba Inu
One thing a pro-crypto Trump administration can't fix is Shiba Inu's supply issue, which is perhaps the biggest roadblock to another historic run higher. About 589.5 trillion tokens are currently in circulation, so based on the price per token of $0.000027 as of this writing, Shiba Inu has a market capitalization of $16.7 billion.
Simple math suggests that a price of $1, multiplied by 589.25 trillion tokens in supply, would give Shiba Inu a market cap of $589.5 trillion. That would make it 159 times more valuable than Apple, which is the world's largest company (its market cap is currently $3.75 trillion).
It would also make Shiba Inu more valuable than the total wealth of every person on Earth, which came in at $454 trillion in 2022, according to UBS. Simply put, there is absolutely no way Shiba Inu is rising to $1 per token as things stand right now.
However, the Shiba Inu community is trying to solve the problem by "burning" tokens, which removes them from supply forever. The easiest way for investors to participate is by sending their tokens to a dead wallet where they can never be retrieved. In theory, the price per Shiba Inu token should organically increase in proportion to the number of tokens that are burned.
Image source: Getty Images.
Shiba Inu could reach $1, but the end result might surprise investors
In order to justify a price of $1 per token, around 99.99998% of all tokens would have to be burned. In other words, the current supply of 589.5 trillion tokens would have to shrink to 16.4 billion, based on Shiba Inu's current market cap.
Around 1.7 billion tokens were burned in November, which translates to an annualized amount of 20.4 billion. At that pace, it will take 28,884 years to burn enough tokens to send Shiba Inu to $1, which means hitting the milestone in 2025 is completely out of the question.
But even if investors somehow lived to see that day, they wouldn't make any money. Burning tokens doesn't create any value -- it only reduces supply, which makes each token appear more valuable because it trades at a higher price.
Investors would simply have 99.99998% fewer tokens than they previously held, with each one worth $1. Their net position would be exactly the same as it is today, because Shiba Inu's market cap would still be $16.7 billion. Talk about a futile exercise!
