Shiba Inu (SHIB), the popular meme coin, has experienced a dramatic decline in its price over the past month, falling by 26%. This downturn has been attributed to a significant reduction in the token’s burn rate, which has weakened its value proposition and investor confidence.
SHIB’s market capitalization has also dropped below $8 billion resulting in mounting concerns about its future amidst broader market challenges.
The impact of the declining Shiba Inu burn rate
The most pressing issue for SHIB is its plummeting burn rate. Over the last month, the rate at which SHIB tokens are being burned has dropped by more than 90%, a stark contrast to the previous trend where substantial amounts of tokens were regularly removed from circulation.
This reduction in burn activity has decreased the token’s scarcity, a key factor that once helped to drive its value higher.
Historically, Shiba Inu has seen significant community-driven burning efforts, with over 41% of its initial supply now eradicated.
However, the circulating supply which currently stands at around 583 trillion tokens is still quite high and the decline in burn rate suggests that there is less demand to reduce this supply, which could exacerbate the bearish outlook for SHIB.
Furthermore, the introduction of Shibarium, a layer-2 scaling solution that employs a new burning mechanism involving BONE tokens, has added complexity to SHIB’s value dynamics.
While Shibarium’s system aims to systematically reduce the SHIB supply based on transaction volumes, its effectiveness remains uncertain given the current market conditions.
The broader market sentiment
The broader meme coin sector has also faced challenges, with a nearly 8% decline in the past week. Both Dogecoin (DOGE) and Shiba Inu (SHIB) have experienced downturns, with SHIB specifically down nearly 27% over the last 30 days.
Besides the dwindling burn rate, the diminishing trading volume and bearish market sentiment underscore the difficulties that SHIB is currently facing.
Recent on-chain data highlight several worrying trends for SHIB. Net Network Growth, a key momentum indicator, has dropped by 0.19, reflecting weakened network activity. Additionally, the percentage of SHIB holders in profit has decreased to 45%, with the majority of investors now experiencing losses.
The concentration of SHIB tokens among large investors remains unchanged, suggesting no significant accumulation or distribution by whales.
Furthermore, whale activity, as measured by large transactions, has decreased by 11% in the past day, signalling reduced interest from major investors.
In summary, Shiba Inu (SHIB) faces a challenging period as its price continues to slide amidst a declining burn rate and broader market difficulties.
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