Crypto Crash: Shiba Inu is down 76% in 2022, but will he rebound in 2023?

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Shiba Inu (SHIB -0.63%) is a quintessential meme cryptocurrency – it earned this reputation not for its usefulness as a currency, but for the speculation that led it to a historic yield of 43,800 000% in 2021. Investors with perfect timing would have become millionaires for the price of a cup of coffee.

But what followed in 2022 was the polar opposite, with the token seeing a 76% drop year-to-date. This story is not entirely unique to Shiba Inu, however, as the entire cryptocurrency industry is currently frozen, with its total value of $810 billion well below its all-time high of 2. $9 trillion established last year.

Nevertheless, Shiba Inu face many of their own challenges. That said, where could its price be heading in 2023?

Positive Shiba Inu Catalysts Keep Fizzing

The main reason Shiba Inu couldn’t shake its reputation as a speculative vehicle is that its real-world use cases are so limited. But to the community’s credit, there’s constant work behind the scenes to change that, and some of them are quite innovative (although they don’t guarantee any benefits).

For the past two weeks, Shiba Inu investors have been excited about the potential release of Shibarium, its highly anticipated Layer-2 blockchain solution. Shiba Inu is built on the older Ethereum blockchain, which is clunky and makes transactions relatively expensive, so Shibarium is designed to reduce friction and better position Shiba Inu for new opportunities as a payment mechanism, for example.

Unfortunately, and despite some hints that this release is imminent, it hasn’t happened yet.

In another example, the Shiba Eternity digital card game launched in October and was an instant hit. But the enthusiasm apparently evaporated, and it dropped down the game category rankings in places like Apple’s App Store. Shiba Eternity was designed to eventually run on a blockchain to include real non-fungible tokens (NFTs) and gameplay-fused Shiba Inu tokens. So far, these capabilities have not materialized.

But even if an initiative like Shibarium materializes, it is unlikely to lead to mass consumer adoption, which the Shiba Inu token needs to sustain long-term gains. Just 659 businesses worldwide accept the token as payment for goods and services, and that’s not enough to move the needle.

Shiba Inu May Be Hurt by Wider Crypto Sentiment

The sentiment is overwhelmingly negative right now. Prosecutors in the United States have just started bringing charges against some members of the management team of cryptocurrency exchange FTX, which collapsed in November and owes its 1 million creditors (mostly customers) approximately $3 billion.

Unfortunately, investors learn the hard way that when things go wrong in the cryptocurrency world, there is often no insurance or recourse that can help them recoup their losses. FTX is just the latest in a series of disasters for the industry in 2022 – it follows the breakout of stablecoin TerraUSD, which wiped out an estimated $60 billion, and the collapse of Three Arrows Capital , a hedge fund that sank with $3.5 billion in unpaid debt.

With investor confidence in the crypto sinking, it stands to reason that tokens like Shiba Inu will remain among the hardest hit due to their speculative nature. If investors don’t think Shiba Inu is destined to go higher, then it probably won’t.

Image source: Getty Images.

Here’s where Shiba Inu could go in 2023

Shiba Inu suffers from a unique problem: a huge token stash. There is over 589 trillion in circulation right now, which is why its price per token sits behind so many decimal places, trading at $0.000008 at the time of this writing.

The community is trying to “burn” part of this supply, which means removing the tokens from circulation permanently, as this would (theoretically) increase its price in proportion. This is done in a number of ways, including sending tokens to a dead wallet, buying coffee from the Shiba Coffee Co., streaming a specific music playlist, and even participating in the next community metaverse project.

But there is a problem. In the past 24 hours, only 10.9 million tokens have been burned. If this rate continues throughout 2023, only 4 billion will be withdrawn from circulation by the end of the year. In other words, only 0.000007% of the exceptional offer, which will do nothing for the price of Shiba Inu.

Combined with the fact that investor sentiment towards the cryptocurrency industry is unlikely to improve much in the new year, the risk is on the downside for Shiba Inu tokens.

Anthony Di Pizio has no position in the stocks mentioned. The Motley Fool holds positions and recommends Apple and Ethereum. The Motley Fool recommends the following options: long calls $120 in March 2023 on Apple and short calls $130 in March 2023 on Apple. The Motley Fool has a disclosure policy.

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