Shiba Inu burn rate peaks: Assessing market impact

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A large percentage increase in the SHIB token burn was seen on the 11th of August
The price impact was slight, and the meme coin maintained its bearish long-term outlook.

The Shiba Inu [SHIB] burn mechanism saw a noticeable burn transaction on the 11th of August. 38,812,544 or 38.8 million SHIB were burnt, a 38199412.62% increase compared to the burn amount of the previous day.

Since then, the burn rate has mellowed down. Shibburn, which tracks the amount of the meme coin burnt each day, noted a 96% burn rate decrease after yesterday’s spike.

What is the burn mechanism?

The goal of burning any crypto token is to ensure scarcity and fend off inflation. For example, Ethereum [ETH] implements this by burning ETH from transaction fees, which are split into two components, base fee and priority fee.

Similarly, Shiba Inu also has a similar burn mechanism. Each time a transaction occurs on the network, a percentage of the transaction fee is sent to the burn address.

The burn or null addresses can receive tokens but can’t send them. Shiba Inu has three of them. Tokens sent to these addresses are effectively “burnt” and can not re-enter circulation.

Price impact of SHIB’s burn rate hike?

Source: SHIB/USDT on TradingView

The price impact was minimal. Over the weekend, the entire crypto market saw a ~5% pullback. The market structure on the 4-hour chart was bullish, but on the higher timeframes, it was keenly bearish.

The RSI showed that the momentum was neutral as it twisted about the neutral 50 level. Meanwhile, the OBV was moving southward, although the speed has decreased over the past four days.