SHIB Token: This is what you need to know about Shiba Inu's burn rate reaching 3,700%

Bittime - Shiba Inu (SHIB) recorded a spike in burn rate of up to 3,700%, or the equivalent of burning 53.31 million tokens in just 24 hours. This figure is enough to arouse the interest of many people, especially those who are curious about the prospects for SHIB price increases. 

So, what exactly is this burn rate, how does it impact the price, and is it possible for SHIB to reach the ambitious value of $2? Here's the review.

What is the Burn Rate on Crypto Tokens?

Burn rate in a crypto context refers to the number of tokens that are “burned” or permanently removed from circulation. This process is carried out by sending tokens to an unused wallet, making them no longer accessible. 

The concept of burning aims to reduce the number of tokens available, thereby increasing the scarcity of that asset in the market. In economic theory, if supply decreases while demand remains constant or increases, prices should tend to rise.

Read also: Shiba Inu Burn: A total of 5.6 Billion SHIB Tokens Removed from Circulation

How Does SHIB Burn Rate Work?

The SHIB token, like most crypto assets, has a very large supply amount. Burn rate is one method used to reduce the number of these tokens. 

Each time the burn rate increases, it means more tokens are removed from circulation, which in the long term can create upward price pressure. The recent 3,700% burn rate spike on SHIB indicates intensive efforts to reduce the supply of the token.

However, because the total supply of SHIB is still very large, the impact of this burning may only be felt significantly in the long term or if the burn rate remains consistently high.

3 Reasons Behind Shiba Inu's Burn Rate Surge

There are at least 3 reasons behind the increase in SHIB burn rate. You can find out below:

1. Supply Reduction to Increase Scarcity 

With 53.31 million tokens burned in one day, this burn rate aims to reduce the total supply of SHIB. 

In the crypto world, asset scarcity can create attractiveness and the potential for higher prices, especially for investors who believe in SHIB's long-term prospects.

2. Pro-Crypto Initiative Project by Shiba Inu 

Shytoshi Kusama, one of the main Shiba Inu developers, has proposed a project called S.H.I.B. which aims to develop a “crypto valley” in the United States with funding ranging from $1.3 billion to $2.35 billion. 

If the project is successful, SHIB's popularity and adoption could increase, supporting the token's value in the market.

3. Soaring Trading Volume

In the last few days, SHIB experienced a 7% price increase in just one day, with trading volume jumping 200% and open interest in the futures contract rising 25%. 

This figure indicates there is strong market interest in SHIB, which could support short-term prices.

Can SHIB Hit $2?

While a high burn rate and positive market sentiment are driving the price of SHIB, there are major challenges to consider if SHIB is to reach a value as high as $2.

1. Market Cap Implications 

To reach a price of $2, SHIB's market capitalization value would have to grow enormously, surpassing the capitalization of Bitcoin or almost all other crypto assets combined. 

Given the huge supply of SHIB, this figure is almost impossible to achieve unless there is a very drastic reduction in supply.

2. Limited Effects of Deflation 

Even though SHIB's burn rate is surging, its immediate impact on the price will likely only be visible if the burn rate remains consistent over the long term. With a large supply structure, it will take years for the effects of deflation to really be felt significantly in market prices.

3. More Realistic Price Targets 

Given those challenges, a more realistic price target might be in the $0.001 to $0.01 range, assuming there is increased adoption and consistency in burn rate. This figure is more likely to be achieved in the next few years, if burning initiatives and project development continue.

Things SHIB Investors Should Pay Attention to

Even though the $2 target looks unrealistic, SHIB investors can still be optimistic if they focus on the following elements:

1. Consistent Burn Rate Initiative 

Continuously increasing burn rates can create shortages that support prices. Investors should monitor this burning initiative and the development of other projects that could support a reduction in the SHIB supply.

2. Community Development and Initiatives 

Projects like S.H.I.B. Shytoshi Kusama's proposal is an example of a community initiative that could increase SHIB's appeal in the future. Support for applications in the DeFi or gaming sector could also be an added value for SHIB.

3. Market Sentiment and Crypto Trends 

Like other crypto assets, the price of SHIB is also greatly influenced by market sentiment. Positive trends in crypto adoption and supportive regulations could be a catalyst for SHIB price increases.

Read also: SHIB Potential To Go To $0.01, What Does Shytoshi Kusama Say?

Conclusion

The soaring burn rate on SHIB and increasing trading volume are positive signals for investors who are optimistic about the future of this token. 

Although the $2 price target seems difficult to achieve, SHIB still has the potential to continue growing and reach more realistic prices in the future. A price of $0.001 or $0.01 is achievable, especially if the burn rate and adoption in the market continues.

For SHIB investors, it is important to maintain realistic expectations and consider this investment with a long-term view. The volatile crypto market demands patience, especially for tokens with large supplies like SHIB.

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