On-chain data tracker Shibburn has reported a significant 20 million Shiba Inu (SHIB) burn transaction, contributing to a total daily burn of 20.79 million tokens. This burn event, executed by an anonymous whale, has increased the daily burn rate by 34.24%, underscoring efforts to reduce SHIB’s circulating supply.
Token Burns and SHIB’s Deflationary Strategy
Token burning is a fundamental component of SHIB’s tokenomics, designed to create deflationary pressure that could potentially increase the token’s value over time. By locking tokens in dead wallets, supply diminishes, ideally making the remaining SHIB more scarce and valuable.
However, despite these ongoing burns, SHIB’s price has remained volatile. Currently, the token is down 60% from its post-election high of $0.00003340, highlighting concerns about the actual impact of burns on price stability.
Is the Deflationary Strategy Effective?
While reducing the circulating supply sounds promising, SHIB’s sheer volume remains a challenge. With an astronomical 589.25 trillion tokens still in circulation, periodic burns may not be sufficient to create meaningful price appreciation.
Historical data supports this skepticism. On February 23rd, for instance, 40.45 million SHIB tokens were burned. Yet, just a day later, SHIB experienced an 11% price dip, largely mirroring Bitcoin’s (BTC) 4.5% drop. This suggests that broader market conditions and investor sentiment have a stronger influence on SHIB’s price than token burns alone.
Lack of Social and Market Momentum
SHIB’s price movements are often fueled by social media hype and market sentiment rather than fundamental changes in supply. Currently, SHIB’s Social Volume has hit a three-month low, reflecting declining interest and engagement within the crypto community. Historically, a drop in social engagement makes it difficult for SHIB to rally, as retail investor participation dwindles.
Moreover, trading volume has plummeted from over $4 billion during the election-driven hype to just $311.44 million. This sharp decline in market activity signals weak buying pressure, leaving SHIB vulnerable to extended bearish trends.
For SHIB to break out of its bearish cycle, renewed social engagement, increased trading volume, and broader market recovery are crucial. While burns play a role in long-term supply reduction, they alone are insufficient to drive sustained price growth. Investors will be watching for a resurgence in interest and positive market trends before SHIB can stage a meaningful recovery.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
Also Read: Can Shiba Inu (SHIB) Reach $0.001 with the Launch of SHIB ETFs?
About The Author
