2 Big Reasons to Sell Shiba Inu

With a market cap of $12 billion, Shiba Inu (CRYPTO: SHIBA) is the 15th-largest crypto by market cap. But despite its size, the iconic meme coin has fallen by a staggering 75% from its all-time high reached in late October. Let’s explore three reasons the downside may be far from over.

1. Coin-burning can’t replace growth

According to the crypto news site Watcher News, Shiba Inu’s developers plan to help users “burn” SHIB tokens by adding a burn portal to the platform’s decentralized exchange, ShibaSwap. Burning involves sending tokens to an inaccessible address to remove them from circulation, which could help boost prices by restricting supply.

Image source: Getty Images.

Although developers haven’t provided specifics, this possibly could be done by destroying a percentage of transaction fees when users trade SHIB on ShibaSwap. And if it goes into effect, it would follow a series of “burn parties” held by Shiba Inu shareholders — including a Valentine’s Day event that destroyed 240 million SHIB tokens worth roughly $7,500.

But with a jaw-dropping 549 trillion SHIB tokens in circulation, burning a relative handful of coins probably won’t do much to reduce the asset’s overinflated supply. Further, burning only addresses the supply side of the equation. If demand continues to fall at a potentially greater rate than users can destroy tokens, SHIB’s price collapse will continue.

2. The metaverse project won’t solve the problem

Shiba Inu’s developers have another trick up their sleeve as they try to re-inflate the SHIB bubble: a metaverse. The project, dubbed Shiberse, was announced in January as “an immersive experience” for the Shiba Inu ecosystem. And in February, the team provided an update introducing Shiba Lands, which will be virtual real estate in the proposed metaverse. But the devil is in the details.

According to the announcement, Shiba Lands will have to be purchased with Doge Killer, a completely different token from SHIB. This means the metaverse may not have any fundamental impact on SHIB demand (aside from generating hype) unless the developers incorporate SHIB into some undisclosed aspects of the project.

The announcement also suggests there will be an antidumping mechanism that could prevent investors from selling the token after purchasing it. This feature has been used in crypto thefts such as the Squid Game token scam, which was used to steal more than $2.1 million in 2021. Such a feature could damage the project’s credibility if developers put investors at risk of being unable to sell when they want.

Can Shiba Inu shed the meme coin stigma?

Unlike earlier meme coins (these are cryptocurrencies designed to benefit from hype, not utility) such as Dogecoin, Shiba Inu’s developers have made a valiant attempt to create use-cases for SHIB. But unfortunately, these efforts have done little to stop the asset’s steady decline. At the end of the day, Shiba Inu doesn’t bring much new to the table in terms of technical specs, and its fundamentals are still weak.

With hundreds of trillions of SHIB in circulation, coin burning will have a minuscule impact on the token supply. And so far, the developer’s much-hyped metaverse project doesn’t look like it will have much affect on the token’s fundamentals either. Investors should avoid Shiba Inu until these challenges are resolved (if that’s even possible).

10 stocks we like better than SHIBA INU
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now… and SHIBA INU wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 3, 2022

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.