Can Shiba Inu Reach $1? Yes, but It Could Take 173,308 Years! Here's Why | The Motley Fool (2024)

Shiba Inu (SHIB 3.15%) delivered one of the largest gains in financial market history in 2021, when the token soared 45,278,000% for the year. In dollar terms, a perfectly timed investment of just $3 would have been enough to make you a millionaire.

But the speculation fever that drove that incredible gain quickly evaporated during the cryptocurrency winter in 2022, sending Shiba Inu plunging 90% from its all-time high. Sentiment across the industry has finally started to recover, and Shiba Inu is sitting on a year-to-date gain of 67% in 2024.

Investors might be wondering if this is the start of another historic bull run. Could Shiba Inu soar all the way to $1 from its current price of $0.000017? The answer is yes, but there is a high chance investors won't make any money if it happens. Here's why.

Shiba Inu is facing a key fundamental hurdle

Adoption is the key for any currency to sustain its value. If businesses won't accept it as payment for goods and services, then consumers have no reason to hold it, and that's the challenge most cryptocurrencies face at the moment -- even industry leaders like Bitcoin.

According to Cryptwerk, just 957 merchants in the entire world accept Shiba Inu as payment, and many of them are relatively obscure. In other words, you can't count on spending your tokens right now at popular retailers like Target or even Amazon. Volatility is probably a big reason for that, because any currency that can soar in value by millions of percentage points, only to collapse a short time later, would make cash flow management practically impossible.

Developers are trying to create new use-cases for Shiba Inu, but none of them appear to be moving the needle. They recently launched Shibarium, which is a Layer-2 blockchain solution designed to bypass some of the costs and inefficiencies of the legacy Ethereum network upon which Shiba Inu is built. This improvement makes Shiba Inu tokens more attractive as a payment mechanism, but it hasn't driven a measurable uptick in the number of merchants willing to use it.

Supply is another problem standing in the way of further gains

A lack of adoption isn't the only thing standing in the way of another historic gain. There are 589.26 trillion Shiba Inu tokens in circulation, and at the current price of $0.000017 per token, Shiba Inu has a market capitalization of $10.1 billion. Simple math suggests if the price per token rose to $1, Shiba Inu's market cap would be a mind-boggling $589.26 trillion.

According to Credit Suisse, the total amount of wealth held by every person, business, and government in the world is around $432 trillion, so it's impossible for Shiba Inu to achieve a price of $1 in its current state. The only feasible way to get there is by shrinking the supply of tokens.

Shiba Inu investors are already working on that by "burning" tokens, which means to remove them from circulation forever. The easiest way to do that is by sending them to a dead wallet where they can't be retrieved, but a couple of years ago, enthusiasts created several other ways to participate.

Investors could buy coffee from the Shiba Coffee Company, which used some of the profits to burn tokens, or they could use the Shiba Search internet search engine, which used some of its advertising revenue for the cause. Unfortunately, most engaging options like those are no longer available, possibly because the community realized how significant the task really is.

For example, around 99.99998% of all existing tokens would have to be burned to bring supply down to 10.1 billion, which is the level that would warrant a price of $1 per token based on Shiba Inu's current market cap.

That could take thousands of years, and it won't yield a return

Over the past month, an average of 9.2 million Shiba Inu tokens were burned each day, which translates to around 3.4 billion each year. Considering 589.25 trillion tokens need to be burned to achieve a price of $1, it would take a whopping 173,308 years to reach that goal at the current pace.

Plus, even when supply eventually shrinks to 10.1 billion tokens, a price of $1 per token will place Shiba Inu's market cap at $10.1 billion -- exactly where it is today. Simply put, reducing supply is a form of financial engineering. It doesn't create any real value; it only forces an organic increase in the price per token in proportion to the number of tokens that are burned.

So, while it is technically possible for Shiba Inu to reach $1 thousands of years from now, it won't by itself actually lead to any gains for investors.