The broader cryptocurrency market has taken a beating in 2022. After peaking at nearly $3 trillion in value in November, the entire industry has fallen as higher interest rates and a looming recession spooked investors. As of this writing, the crypto market was worth just over $1 trillion.
Some of the most speculative cryptocurrencies, like Shiba Inu (CRYPTO: SHIB), have been absolutely hammered in 2022. But supporters of the dog-inspired meme token aren't losing hope and are patiently waiting for it to hit a lofty milestone.
Let's find out if Shiba Inu can one day reward investors and reach $1 per token.
What is Shiba Inu?
Seeing that Dogecoinlacked smart-contract functionality, the creators of Shiba Inu decided to launch a token in August 2020 on the Ethereumblockchain to expand its potential in the world of decentralized applications, or dApps. This makes SHIB, Shiba Inu's native token, compatible with the entire Ethereum ecosystem, opening up accessibility to decentralized exchanges and crypto wallets.
Shiba Inu caught on with speculators, and it produced a monster return in 2021. But it is now 85% off its all-time high, thanks to waning interest. This makes sense, given that Shiba Inu hasn't made much progress in developing real-world utility, an attribute absolutely necessary for a crypto to remain viable.
The project's founders have been working to decrease the token supply, which currently stands at a ridiculous 549 trillion. The hope here is that by implementing different burning strategies, like the one put in place as Shiba Inu enters the metaverse, the price should rise over time. But I see this as nothing more than financial engineering, something that won't end up boosting the crypto's prospects.
A challenging landscape
To be clear, buying SHIB tokens is purely a speculative move. Betting on short-term price movements is gambling. For Shiba Inu to gain in value, it must introduce valuable use cases. However, it has so far failed at this. Ethereum, on the other hand, is attracting the most developers and capital to its ecosystem, and it will surely continue being a top crypto in the space.
The make matters worse, after recent meltdowns in the industry -- most notably the collapse of the TerraUSDstablecoin, as well as the bankruptcy of lending platform Celsius -- regulators will certainly start to take a more critical stance toward the entire market. And this means that most tokens will be subject to more stringent laws and oversight, which could be a headwind for a crypto like Shiba Inu.
Whereas a project like Shiba Inu had essentially no barriers to entry before, it will probably become more challenging, difficult, and costly to not only launch a new cryptocurrency but to continue operating one as well.
Plus, the macroeconomic environment is shifting. Easy-money policies of the past couple of years flooded the economy with capital, resulting in investors chasing returns on the riskiest assets. This undoubtedly pushed up the prices of even the most unproven cryptocurrencies. But with interest rates on the rise to curb soaring inflation, investors are allocating their capital with safety in mind. Consequently, Shiba Inu's upside is limited.
A $1 price target is unlikely
If the price of one SHIB were to reach $1 per token at some point in the future, based on its current outstanding token count of 549 trillion, this means that the entire network's market cap would equal $549 trillion. Just by way of comparison, consulting firm McKinsey & Co. estimates that global wealth totals roughly $500 trillion. Therefore, SHIB hitting $1 per token is virtually impossible unless burning strategies prove to be successful and there's substantial renewed interest from investors to own the token.
But I believe this scenario probably won't happen, and that's why it's best for investors to stay far away from Shiba Inu.
Neil Patel has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum. The Motley Fool has a disclosure policy.
