- SHIB burn rate collapsed, causing its value to plummet.
- The cause of this collapse was tied to issues within the Shibarium network.
Shiba Inu [SHIB] has been on a downward spiral, unable to sustain its early March rally, when the memecoin tested the $0.0000380 resistance level.
The token’s persistent bearish momentum has pushed its price down to a new support line of $0.00001323 during early August.
To make matters worse, according to data from the Shibburn website, the SHIB burn rate has plummeted, with only 261,691 SHIB burned recently.
As important as these routine SHIB burns are in keeping Shiba Inu’s community appeal intact, can they impact its overall price?
Shiba Inu’s deflationary model
From an economic standpoint, SHIB burns is a key strategy used by networks to boost scarcity. Any delay in the routine burning of these tokens can dampen their value.
As mentioned earlier, only 261,691 accounted for total SHIB burned recently, way less compared to a 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 the 22nd August.
This significant reduction in supply led to an 8% price surge the following day.
Despite this uptick, SHIB burn rate remained low. Consequently, SHIB’s price has lost momentum, dropping 10.5% over the past three days.
After a 23.32% surge last week, which took SHIB to a high of $0.00001610, the price has now settled at $0.00001441.
Low transaction activity caused SHIB burn to collapse
According to data from ShibariumScan, weekly SHIB burn figures are more encouraging.
It showed an 843% increase, with 114M SHIB tokens sent to unspendable wallets in the last seven days.
Despite this, the activity on the Shibarium layer-2 blockchain has seen a slowdown. AMBCrypto notes that new transactions on Shibarium has dropped significantly.
Source : ShibariumScan
Currently, the total transaction count on Shibarium stands at 418M, with 1.8M wallets connected to the network.
The data showed that the daily transactions fell over 88%, dropping from 28K on the 20th of August to 3.3K by the 23rd of August. This number saw a slight increase to 4K by the 26th of August.
In short, with fewer transactions on Shibarium, the SHIB burns triggered by these transactions might have decreased, leading to a drop in SHIB’s price.
Source : Santiment
Interestingly, the total value of SHIB tokens moved, considering how long they were held, reached $1 trillion on a day marked by high volume.
This highlighted significant selling activity, which contributed to the plunge in SHIB’s value, aside from low SHIB burn rate.
Although the Weighted Sentiment has since shifted to negative, it is surprising that on the day of the event, sentiment was actually positive.
Realistic or not, here SHIB’s market cap in BTC’s terms
According to AMBCrypto, determining the price of a memecoin involves a multilayered analysis.
Therefore, while low transaction activity on the Shibarium network reducing SHIB burns was a significant factor, it was not the sole cause of the SHIB drop.
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