Can Shiba Inu Reach $1 During the Next Crypto Bull Market? The Answer Might Shock You.

Shiba Inu (CRYPTO: SHIB) is a highly speculative cryptocurrency that was created in 2020 by an anonymous developer named Ryoshi. The developer was trying to capitalize on the heightened interest in other meme coins, such as Dogecoin, which were soaring in value at the time.

In 2021, Shiba Inu exploded higher by a staggering 45,278,000%, which remains one of the greatest annual returns in financial market history. In fact, an investor who bought just $3 worth of Shiba Inu tokens on Jan. 1, 2021, would have been sitting on over $1 million by Dec. 31 of the same year.

Unfortunately, speculative frenzies never last, so Shiba Inu has since declined by 93% from its peak and now trades at just $0.00005 per token. But investors are hopeful a fresh crypto bull market might be on the way, following strong rallies in some of the industry's leaders (like Bitcoin) over the past month. Could that send Shiba Inu soaring to $1 per token? The answer might shock you.

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The adoption problem, and the even bigger supply problem

Shiba Inu wasn't created with a particular use case in mind, so it lacks an organic source of demand. Without a steady stream of buyers, it has a very slim chance of trending higher over the long term. While it can technically be used to make payments, only 1,226 businesses worldwide are willing to accept it in exchange for goods and services, and most are obscure providers of internet and crypto services.

Moreover, many investors consider Bitcoin a legitimate store of value, much like a digital version of gold, because it has consistently reached new highs since its launch in 2009. Shiba Inu, on the other hand, hasn't set a new high in over five years, which is why it doesn't experience much demand from the investment community.

But there is an even bigger barrier standing in the way of Shiba Inu reaching $1: Its enormous supply. There are 589.2 trillion tokens in circulation, so even at the current price of $0.00005 per token, Shiba Inu has a market capitalization of $3.1 billion. Simple math suggests that a price of $1 per token would result in a market cap of $589.2 trillion.

For some perspective, the combined value of all 500 companies in the S&P 500 index is currently $69.5 trillion, and the output of the entire U.S. economy was just $30.7 trillion last year. Therefore, Shiba Inu has absolutely no chance of amassing a market cap of $589.2 trillion.

However, there is another way Shiba Inu could reach $1. The community is trying to get around its supply issue by "burning" tokens, which removes them from circulation forever, and investors can participate by sending their tokens to a dead wallet where they can never be retrieved. In theory, the price per Shiba Inu token should increase in proportion to the number of tokens burned, creating a legitimate pathway to the $1 milestone.

It could take a shocking amount of time to burn enough tokens

Based on Shiba Inu's market cap of $3.1 billion, burning 99.99998% of the 589.2 trillion tokens currently in circulation to leave just 3.1 billion remaining would, theoretically, result in a price of $1 per token.

However, just 400 million tokens were burned in August, for an annualized rate of 4.8 billion. It will take 122,750 years to burn enough tokens to justify a price of $1 at the current pace, so it certainly won't happen during the next crypto bull market. In fact, it probably won't happen in the next 100 bull markets.

But it gets worse, because burning tokens to raise their price doesn't create any value, so nobody would actually make any money. Each investor would have 99.99998% fewer tokens, so even though their remaining tokens would be worth $1 each, their net financial position wouldn't have changed at all.

Well, actually, after 122,750 years' worth of inflation, every investor will be far worse off.

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