- The SHIB burn rate collapsed, causing its value to drop.
- The cause of this collapse was linked to problems within the Shibarium network.
Shiba Inu [SHIB] has been on a downward spiral, unable to sustain its early March rally when memecoin tested the $0.0000380 resistance level.
The token’s sustained bearish momentum has pushed the price down to a new support line of $0.00001323 in early August.
To make matters worse, according to data from the Shibburn website, the SHIB burn rate has plummeted, with only 261,691 SHIBs burned recently.
As important as these routine SHIB burns are to keeping the Shiba Inu’s community appeal intact, can they affect its overall price?
Shiba Inu’s deflation model
From an economic point of view, SHIB burns are a key strategy used by networks to increase scarcity. Any delay in the routine burning of these tokens could dampen their value.
As mentioned earlier, only 261,691 accounted for the total SHIB burn recently, far less compared to the total of 7 million SHIB burned the previous day.
Source: Shiba Burn Tracker
According to AMBCrypto’s analysis of the chart above, more than 28 million SHIB tokens were burned on August 22nd.
This significant reduction in supply led to an 8% price increase the following day.
Despite this increase, the SHIB burn rate remained low. As a result, SHIB’s price has lost momentum, falling 10.5% over the past three days.
After an increase of 23.32% in the last week which brought SHIB to a high of $0.00001610, the price has now settled at $0.00001441.
Low transaction activity caused SHIB burning to collapse
According to data from ShibariumScan weekly SHIB burn numbers are more encouraging.
It showed an increase of 843%, with 114 million SHIB tokens sent to useless wallets in the last seven days.
Despite this, activity on the Shibarium layer-2 blockchain has seen a slowdown. AMBCrypto notes that new transactions on Shibarium have dropped significantly.
Source: ShibariumScan
Currently, the total number of transactions on Shibarium is 418 million. with 1.8 million wallets connected to the network.
The data showed that daily transactions fell by over 88%, falling from 28,000 on August 20 to 3,3,000 on August 23. This figure saw a slight increase to 4K on August 26.
In short, with fewer transactions on Shibarium, the SHIB burns triggered by these transactions may have decreased, leading to a decrease in SHIB’s price.
Source: Sentiment
Interestingly, the total value of SHIB tokens moved, given how long they were held, reached $1 trillion on a high-volume day.
This highlighted significant selling activity which contributed to the decline in SHIB’s value apart from the low SHIB burn rate.
Although the weighted sentiment has since shifted to negative, it is surprising that sentiment was actually positive on the day of the event.
Realistic or not, here is SHIB’s market cap in BTC terms
According to AMBCrypto, determining the price of a memecoin involves a multi-layered analysis.
Therefore, while low transaction activity on the Shibarium network reducing SHIB burns was a significant factor, it was not the only reason for the SHIB drop.