12 March 2023 10:00, UTC
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Shiba Inu, the meme-inspired cryptocurrency, has been burning millions of its tokens since its creation. However, the burning mechanism that is supposed to reduce the circulating supply of SHIB does not seem to be very effective in terms of affecting its value on the market.
Despite daily burns of around 100 million SHIB, the token’s value remains largely driven by speculative interest rather than the amount of assets sent to burn addresses. This raises the question of why the burn rate might be ineffective.
One possible explanation is that the burning mechanism does not take into account the psychology of the market participants. The amount of tokens burned on a daily basis might seem significant on paper, but in practice, it might not be perceived as such by traders and investors.
Moreover, the burn rate might not be sufficient to offset the inflation caused by the SHIB token supply. In other words, the burning mechanism might not be able to keep up with the rate at which old tokens lose their value due to the enormous supply.
Another factor that might affect the effectiveness of the burning mechanism is the fact that most of the tokens are held by a small number of addresses, commonly referred to as whales. These large holders might not be willing to participate in the burning process, either because they do not see the benefit of reducing the supply or because they want to maintain their control over the token.
Furthermore, the speculative interest around the token might be driven by factors other than the burning mechanism. For example, the token’s popularity on social media and support of high-profile figures might create hype that fuels the demand for SHIB, regardless of the amount of tokens burned.
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