With a market cap of $ 12 billion, Shiba Inu (quotation SHIB) is the 15th largest cryptocurrency by market cap. But despite its size, the iconic meme coin has dropped a staggering 75% from its all-time high in late October. Let's explore three reasons why the downside may be far from over.
1. Burning coins cannot replace growth
According to crypto news site Watcher News, Shiba Inu developers plan to help users "burn" SHIB tokens by adding a burning portal to the platform's decentralized exchange, ShibaSwap. Burning involves sending tokens to an inaccessible address to remove them from circulation, which could help raise prices by limiting supply.
While the developers have not provided specifics, this could be done by destroying a percentage of the transaction fees when users trade SHIB on ShibaSwap. And if it goes into effect, a series of "burn parties" held by Shiba Inu shareholders would follow - including a Valentine's Day event that destroyed 240 million SHIB tokens worth about $ 7.500.
But with 549 trillion SHIB tokens in circulation, burning a relative handful of coins probably won't do much to reduce the asset's inflated supply. Also, burning only addresses the supply side of the equation. If demand continues to decline at a potentially greater rate than users can destroy tokens, the collapse in SHIB's price will continue.
2. The metaverse project will not solve the problem
The Shiba Inu developers have another ace up their sleeve for trying to inflate the SHIB bubble: a metaverse. The project, dubbed Shiberse, was announced in January as an "immersive experience" for the Shiba Inu ecosystem. And in February, the team provided an update by introducing Shiba Lands, which will be a virtual real estate in the proposed metaverse. But the devil is in the details.
According to the announcement, the Shiba Lands will need to be purchased with Doge Killer, a completely different token from SHIB. This means that the metaverse may have no fundamental impact on SHIB demand (other than generating hype) unless the developers incorporate SHIB into some undisclosed aspects of the project.
The announcement also suggests that there will be an anti-dumping mechanism that could prevent investors from selling the token after buying it. This feature has been used in cryptocurrency thefts such as the Squid Game token scam, which was used to steal more than $ 2,1 million in 2021. This feature could damage the project's credibility if developers put investors at risk. of not being able to sell when they want.
Can Shiba Inu break free from the stigma of meme coins?
Unlike previous meme coins (these are cryptocurrencies designed to benefit from hype, not utility) such as Dogecoin, the developers of Shiba Inu have made a valiant attempt to create use cases for SHIB. But sadly, these efforts have done little to stop the asset's steady decline. At the end of the day, the Shiba Inu doesn't bring much new to the table in terms of technical specifications, and its fundamentals are still weak.
With hundreds of trillions of SHIBs in circulation, burning the coin will have a miniscule impact on the token supply. And so far, the developer's much-heralded metaverse project doesn't seem to have much impact on the token's fundamentals. Investors should avoid Shiba Inu until these challenges are resolved (if this is possible).