SHIB burning and its price- Is it a tale of ‘two roads diverged in a yellow wood’

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The scarci­ty prin­ci­ple dic­tates that con­sumers place a high­er val­ue on prod­ucts that are per­ceived to be scarce. In eco­nom­ics, when demand equals sup­ply, an equi­lib­ri­um is achieved. How­ev­er, a dis­e­qui­lib­ri­um ensues when demand exceeds sup­ply or vice versa.

In the first instance, prices of such prod­ucts are dri­ven up due to an increase in demand. In the cryp­tocur­ren­cy mar­ket, this is desir­able and achiev­able through a process known as “Coin Burning”

Put sim­ply, Coin Burn­ing occurs when devel­op­ers and min­ers of a par­tic­u­lar cryp­tocur­ren­cy remove a spec­i­fied por­tion of the cryp­tocur­ren­cy from cir­cu­la­tion. This is done with a view to restrict sup­ply hence, make them scarce, thus dri­ving up the price.

How­ev­er, the reverse is the sit­u­a­tion in the case of Shi­ba Inu. With its burn­ing por­tal launched on 23 April data from the por­tal revealed that a total of 410,343,698,658,607 Shi­ba Inu tokens have been burnt so far. 

In the last 24 hours, the burn rate spiked by over 5000% with a total of 12,713,172,460 SHIB tokens removed from cir­cu­la­tion. One might expect a cor­re­spond­ing spike in price, how­ev­er, in the last 24 hours, no sig­nif­i­cant trac­tion was made by the SHIB token. 

What do we mean, you might ask. Come with us.

Setting fire to the Dollar 

Since burn­ing com­menced on the por­tal, the price of the SHIB token plum­met­ed. In fact, since the incep­tion of burn­ing, the token suf­fered a 48% decline. With a 5119.23% spike record­ed in burn rate in the last 24 hours, no cor­re­spond­ing pres­sure to dri­ve up price was observed. With the token down by 2% in the last 24 hours, investors appeared unex­cit­ed by the mas­sive burn­ing activity. 

Source: Coin­Mar­ket­Cap

A quick look at the mar­ket cap­i­tal­iza­tion revealed a decline. At $13.2b 25 days ago when burn­ing com­menced, the token shaved off 47% from its mar­ket cap. At the time of press, this stood at $6.78b.

Source: Coin­Mar­ket­Cap

Fur­ther­more, the token record­ed no sig­nif­i­cant trad­ing activ­i­ties in the last 24 hours as the trad­ing vol­ume expe­ri­enced an 18% decline.

Source: San­ti­ment

The trouble continues

On-chain analy­sis revealed that despite the spike in burn rate, bare­ly any impact was made on the SHIB token in the last 24 hours. 

At the time of press, the num­ber of unique address­es in SHIBA trans­ac­tions dai­ly stood at 5033. This met­ric has main­tained a steady decline in the past few days as increased burn­ing of the SHIB token did not equate to increased trans­ac­tions by investors. Record­ing a high of 10,283 on 12 May, the num­ber of dai­ly active address­es trans­act­ing SHIBA has dropped by over 50%.

Source: San­ti­ment

While the essence of coin burn­ing is to incen­tivize long-term hold­ers so they can ben­e­fit from price spikes cre­at­ed by induced scarci­ty, the whales, in the last 24 hours could not care less about the spike in burn rate. 

For trans­ac­tions over $100k, the whale trans­ac­tions count stood at 11 at the time of press. On the oth­er hand, for trans­ac­tions over $1m, this stood at zero. 

Source: San­ti­ment

Now, with the Shibar­i­um set to launch at the end of this month or ear­ly next month, a spike in price might be imminent. 

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