Can Shiba Inu Reach $1 in 2027? The Answer Will Blow Your Mind.

The Shiba Inu (CRYPTO: SHIB) cryptocurrency was created in 2020 by an anonymous developer named Ryoshi, who saw the success of the Dogecoin meme coin and wanted to launch an alternative. Ryoshi built Shiba Inu on the legacy Ethereum (CRYPTO: ETH) network, so it's more functional than Dogecoin and, therefore, can create real value in more ways.

Shiba Inu soared in value by a staggering 45,278,000% in 2021, a return strong enough to have turned a perfectly timed investment of just $3 into over $1 million. It remains one of the largest one-year gains in the history of the financial markets, so it's no surprise many investors still keep one eye on this token.

Unfortunately, most of the upside was driven by speculative investors, so Shiba Inu has since lost over 90% of its peak value and trades at just $0.000005 per token as I write this (Oct. 24). But leading cryptocurrencies like Bitcoin and Ether have posted strong gains over the last few months, leading some analysts to believe a new bull market might be on the horizon.

Could that send Shiba Inu soaring to $1 per token sometime in 2027? The answer will blow your mind.

Image source: Getty Images.

Not enough adoption, and too much supply

As an Ethereum-based project, Shiba Inu inherits all of the security, infrastructure, and functionality of the world's largest platform for building decentralized software applications. That means developers can program smart contracts to establish autonomous rules when using the token on decentralized platforms, like crypto exchanges or lending marketplaces. It also means Shiba Inu can be improved over time, and the Shibarium Layer-2 blockchain upgrade, which increases transaction speeds and reduces costs, is one good example.

Having an organic source of demand is the secret to creating value over the long term for any cryptocurrency, but decentralized applications are currently only used on the fringes of industries like finance and gaming. None have quite gone mainstream yet, so they aren't moving the needle for tokens like Shiba Inu.

Moreover, even though Shiba Inu can be used to make payments, just 1,242 businesses around the world are willing to accept it in exchange for goods and services (according to Cryptwerk). Its extreme volatility would make cash-flow management a nightmare for any merchant, and if consumers can't spend Shiba Inu tokens at their favorite stores, they have no reason to buy or hold them.

In summary, the lack of organic demand is a big reason why Shiba Inu is struggling to recover after losing the majority of its value from 2021. But there is another issue: Supply.

There are 589.2 trillion tokens in circulation, so at the current price of $0.000005 per token, Shiba Inu has a market capitalization of $2.9 billion. Simple math suggests that a price of $1 per token would result in a market cap of $589.2 trillion, which would make Shiba Inu eight times as valuable as all 500 companies in the S&P 500 combined. Further, $589.2 trillion is 19 times higher than the annual output of the entire U.S. economy, which was $30.8 trillion last year.

Simply put, there is no way a single Shiba Inu token will ever trade for $1 as things currently stand. However, the community is coming together to "burn" tokens, which involves sending them to a dead wallet where they can never be retrieved, thus permanently reducing the circulating supply. In theory, the price per token should increase in proportion to the number of tokens burned, creating a real pathway to the $1 milestone.

It could take a mind-blowing amount of time to burn enough tokens

Based on Shiba Inu's market cap of $2.9 billion, burning 99.99998% of the 589.2 trillion tokens currently in circulation would, in theory, result in a price of $1 per token.

However, just 137.5 million tokens were burned in September, which works out to an annualized rate of 1.65 billion. It would take a staggering 357,090 years to burn enough tokens to justify a price of $1 at the current pace, so it certainly won't happen in 2027. The October burn rate is much higher, with 331 million tokens leaving circulation as of Oct. 24, but it would still take 148,338 years to eliminate enough tokens if this pace persists.

But that isn't even the worst part, because burning tokens doesn't create any value, so nobody would actually make any money. Since every investor would have to participate by sacrificing 99.99998% of their own tokens, their net financial position would remain exactly the same even though their remaining tokens would be worth $1 apiece.

That complete lack of a financial incentive probably explains why the burn rate is currently so slow, and it likely means none of us will ever see Shiba Inu reach $1.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.