The stock market is a known wealth generator, and it can be life-changing over the long term. In fact, had you invested in the Nasdaq-100 technology index 20 years ago and held on until now, you’d have earned a return of 1,016%. In other words, a $100,000 investment would be worth over $1 million today.
But what if you could earn $1 million from an investment of just $2.29? If you bought the controversial cryptocurrency Shiba Inu ( SHIB 0.19% ) on Jan. 1, 2021, and held on until Dec. 31, that would have been your reality.
The token’s return of 43,800,000% for the year was seemingly once-in-a-lifetime, but naturally, investors would love for history to repeat. Is it possible?
The current problem
At present, Shiba Inu is grappling with a supply issue. There are 589 trillion tokens in circulation, and at the current price of $0.000025 per token, their total value comes to $14.6 billion. Some investors have wondered whether $1 is a possible future price target for Shiba Inu, but that would result in a whopping $589 trillion total valuation.
For context, that would make Shiba Inu 218 times more valuable than Apple, the largest company in the world, which has a market capitalization of $2.7 trillion.
Shiba Inu would also be six times larger than the gross domestic product (GDP) of the entire world, which came in at $94 trillion in 2021.
And since all of the recorded wealth on Earth sits at $431 trillion, if every person, business, and government converted all of their cash and assets to Shiba Inu, that still wouldn’t warrant a price of $1.
But believe it or not, we haven’t reached the most ridiculous part yet. A return of 43,800,000% from the current price of $0.000025 would send Shiba Inu far beyond $1. It would actually soar to a whopping $10.95 per token, taking its total market valuation to over $6 quadrillion. In other words, it’s impossible for Shiba Inu to repeat its 2021 return. Unless…
Burn baby, burn
Solving Shiba Inu’s supply problem is pretty simple at face value. The community has pondered ways to “burn” tokens, which permanently removes them from circulation, and therefore shrinks the 589 trillion supply number. In turn, it would organically boost Shiba Inu’s price per token, assuming its total market valuation of $14.6 billion remained constant.
There are a few potential avenues available to make this happen, but one of the most intriguing is the metaverse. Shiba Inu developers are building a virtual world for the community, and they’re calling it the Shiberse. It will serve as a central meeting hub for investors and enthusiasts of the dog-faced token, and it will feature over 100,000 virtual land plots in addition to non-fungible tokens (NFTs).
Land transactions will be facilitated using the Ethereum cryptocurrency, but Shiba Inu tokens will play a unique role. Owners of virtual land will be able to rename their plots in exchange for a fee paid in Shiba Inu tokens, which will then be burned.
But just how much burning will need to take place to replicate Shiba Inu’s 2021 price explosion of 43,800,000%?
Here’s what the math says
To send the price of a Shiba Inu token soaring 43,800,000% to $10.95 from $0.000025 today, the supply of Shiba Inu tokens would have to shrink from 589 trillion to just 1.33 billion. That assumes its current market valuation of $14.6 billion remains constant the entire time.
In other words, 99.9998% of all Shiba Inu tokens currently in circulation would have to be burned. Unfortunately, it’s extremely unlikely initiatives like the Shiberse would attract enough participation to achieve a result like that.
In fact, it’s such a lofty target that every single holder of Shiba Inu tokens would have to get involved by burning almost all of their own — and that would eliminate any potential return they could have made.
So while anything is possible, Shiba Inu’s blockbuster 2021 return will likely remain firmly in the history books.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.