Can Shiba Inu (SHIB-USD) make a comeback? That’s the question now as the dog-themed “memecoin,” a breakout star in 2021, has delivered lackluster returns so far in 2022. Down over 30% year-to-date, it has experienced bigger losses to that of Bitcoin (BTC-USD) and Ethereum (ETH-USD). These established coins are down 18.4%, and 24%, respectively. The answer to a question about its near-term prospects, however, is not a simple one. There are two factors that could push its token price higher.
First, when talking about Dogecoin (DOGE-USD) recently, I discussed how DOGE and SHIB both could benefit from the fact that institutional investors are not so active in either of them. Given their low correlation to BTC, as well as stocks, some are theorizing that retail traders are cycling into them in lieu of cashing out completely. If this continues, we could end up seeing a net inflow into Doge and Shiba. This could send both names higher. Even as crypto as-as-whole takes another dive. Admittedly, this first factor isn’t a reason to make it a long-term holding. But the second factor may be.
This would be the increasing efforts to “burn,” or destroy, Shiba Inu tokens. Basically, the cryptocurrency world’s version of a stock buyback, “burning” these tokens reduces supply. Hence, in theory, it should help make remaining tokens more valuable. Recently, Shiba’s developers have unveiled the ShibaSwap burn portal. Participating holders receive a new token, burntSHIB. Holding onto this token enables one to generate passive income in the form of Ryoshi rewards. This initiative could further accelerate token burning, lifting SHIB to higher prices. In theory, both these factors could help Shiba get moving in the right direction.
Or will it? The theorized cycling into “memecoins” may not fully play out. Instead, just like how the so-called “smart money” is taking a “risk-off” approach, shunning speculative assets like crypto in favor of safe havens, the same will happen with retail traders. This makes sense, given individual investors are more prone to cashing out during market downturns. As for the token burning thesis, if supporters of this crypto plan to burn their way to higher prices, they have their work cut out for them. How so? Circulating supply of Shiba stands at just over 549 billion tokens.
Despite headlines about billions of tokens being burned, these numbers need to hit the trillions before it can possibly make a difference. That’s not all. Lowering supply is just one side of the equation. Just like with Doge, Shiba needs to become more than just a gimmick for it to see increased use and increased prices. Bottom line, while it’s not for certain Shiba Inu goes to the dogs from here, don’t be so certain it’s on the verge of a rally either.
On the date of publication, Thomas Niel held long positions in BTC-USD and ETH-USD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.