The Shiba Inu team made a significant announcement last Friday confirming that the layer-2 solution Shibarium will introduce an automatic burning mechanism.
Launching a hard fork with the new Bor version will upgrade the burning mechanism and enhance the ecosystem. SHIB’s price was expected to skyrocket after the announcement but went the opposite direction in the charts.
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Why Did SHIB’s Price Dip Despite the Shibarium Announcement?
Market Reaction
The market did not find the announcement bullish despite Shibarium’s promises of automatically burning SHIB tokens. The layer-2 blockchain will send the tokens to the dead wallet, reducing their circulating supply and making them scarce.
Shiba Inu must remove tokens from circulation to scale up sustainably in the indices.
Existing Burn Mechanism
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The Shibarium layer-2 network has been burning SHIB tokens for a year after the locked-in threshold was met. The only update is that Shibarium will automatically burn the tokens, leaving out the manual process. Investors know that the announcement is nothing new, as the shift is only from manual to automatic through the hard fork.
Impact on SHIB’s Price
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Shiba Inu’s price could have skyrocketed only if the team had announced they were burning trillions of tokens. This would have set off an extensive buying spree, as taking an entry position when trillions of SHIB tokens are burned will reward investors handsomely.
That was not the case, as the same number of tokens were burned, and the only difference was the shift from manual to automatic.
Current Burn Rate
In general, less than 100 million SHIB tokens are burned daily. At this pace, it would take more than 200 years to remove 90% of its circulating supply.
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For SHIB’s price to sustainably scale up in the charts, billions or trillions of tokens must be sent daily to the dead wallet. A mere shift from manual to automatic burns is not the answer.
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