Meme coins have become a lucrative option for retail investors wanting to dabble in cryptocurrencies. They often come at throwaway prices and there is always an unlimited supply of coins in circulation. Meme coins as the name suggests are crypto tokens that are mostly created as a joke or to mock other established cryptocurrencies. One such coin Shiba Inu has been capitalising on the general crypto market revival over the last few days.
Shiba Inu (SHIB) has gained close to 43 percent over the last week. Bitcoin and Ethereum have clocked gains of around 13 percent and 12 percent, respectively in the same period. SHIB’s market capitalisation was around $17.23 billion at the time of writing, making it the 13th most sought-after cryptocurrency. The meme coin took a breather on Wednesday and was trading around 10 percent lower at $0.00003.
Shiba Inu was anonymously created in August 2020 and has quickly gathered steam since. The sheer charm of the emblem dog and tweets from celebrities like Tesla CEO Elon Musk and Ethereum co-creator Vitalik Buterin has continuously driven the cryptocurrency’s prices to new highs. But what is fuelling the current rally in Shiba Inu prices?
The price spike coincides with multiple tweets by Bigger Entertainment, a crypto entertainment company, which declared that a massive ‘coin burn’ would be held on Valentine’s Day. The event seeks to destroy 162 million SHIB tokens live on February 14.
A coin burn is done to remove a certain number of crypto tokens from circulation such that the supply drops and, in turn, demand fuels. This changed supply-demand dynamic leads to an increase in prices.
The company even coaxed users to pay a small fee via credit cards to participate in the event and further drive up the price of the SHIB token. Bigger Entertainment CEO Steven Cooper tweeted on Sunday – “Alright #shibarmy. If we sell 1,200 more tickets, this becomes the largest burn party we’ve had yet. If you haven’t pitched in yet, get your tickets today. All #shib will be burned live on YouTube on 14th February at 2pm CST. We can do this :)”
This is not the first time that such an event is happening in the Shiba Inu history books. Mass coin burning is a key component of Bigger Entertainment’s business. In December 2021, it sold $5 tickets to another Christmas burning event and destroyed 176 million SHIB. The proceeds from ticket sales are used to buy SHIB tokens which are subsequently burnt in a live event.
But the artificially altered supply-demand balance is not the only reason driving Shiba Inu’s price hike. On February 5, Singapore headquartered blockchain solutions provider Unification announced that it has been working closely with Shiba Inu creators to develop ‘Shibarium’ – a layer 2 blockchain. Unification has worked with the likes of Google and Amazon in the past, and the word it puts out is to enough sway crypto markets and cause a disruption.
Shiba Inu does not have a blockchain of its own. It is powered by the Ethereum blockchain (layer 1), thus warranting the need for a solution that can be built on top of the parent blockchain, which then becomes layer 2. Unification intends to make gaming transactions a low-cost operation and streamline them by deploying the solution it is building with the ‘Shib Army’ (the developers of the Shiba Inu).
In its official blog, Unification mentioned that it would begin public testing of the solution very soon. Gritt Trakulhoon, an investment analyst at Titan Global Capital Management USA Inc., told Bloomberg that the anticipation following the statement in the blog could have driven investors to buy in and take advantage.
But that’s not all. On February 3, Shytoshi Kusama, a prominent influencer for Shiba Inu, made announced that Welly’s, a chain of burger restaurants, was partnering with Shiba Inu to handle all its payments and integrate Shiba Inu blockchain into its business processes.
While the above three reasons are the most likely drivers of Shiba Inu’s price hike, the meme coin’s underlying fundamentals have not changed. This means that investing in the cryptocurrency still remains a risky bet and all retail investors must exercise due diligence before dipping their toe in.