With 2022 now all but in the books, cryptocurrency investors will be happy to start fresh in 2023 after the crypto winter has gripped the entire industry and brought the momentum that started to build in 2021 to a screeching halt.
The meme token Shiba Inu (SHIB 1.02%) has not been spared, down about 75% in 2022 and sporting a roughly $4.9 billion market cap. The culprit is the recent downfall of one of the world’s largest crypto exchanges, FTX, which has filed for bankruptcy and seen a flurry of bad press. Regulators are also swooping in. The rest of the industry has suffered fallout from the FTX collapse as uncertainty has taken over.
Despite the tough outlook, crypto bulls will argue that it’s a good time to buy the dip and that the industry has better days ahead. Can Shiba Inu ascend to a $10 billion market cap in 2023? Let’s take a look.
Examining the catalysts
There are a lot of reasons that the Shiba Inu bears might be negative on the token. For one thing, there is no particularly unique use case for Shiba Inu. Some tokens and networks can be used to disrupt certain industries or carry out specific functions, but Shiba Inu only possesses the peer-to-peer payment capabilities that pretty much every cryptocurrency has.
This is in part because Shiba Inu doesn’t have its own network. Rather, it’s an ERC-20 token, meaning it is built on top of the Ethereum network and therefore has a certain set of properties, such as being fungible, transferable, and having a fixed number of tokens. Shiba Inu does have a fixed supply, but it’s 1 quadrillion tokens, which doesn’t exactly offer a favorable supply-and-demand setup for investors.
One Shiba Inu-specific catalyst that does look interesting is the upcoming launch of the beta version of Shibarium. Shibarium is a layer 2 scaling solution that will be built on Shiba Inu’s protocol and create more of an individual network for Shiba Inu.
This could lead to lower transaction (or gas) fees when using Shiba Inu. Because it is an ERC-20 token, any congestion on Ethereum leads to congestion for those using Shiba Inu and an increase in gas fees. Shibarium will also supposedly come with a burning mechanism that would burn tokens with every transaction and help reduce Shiba Inu’s massive supply.
Other than that, as the 16th largest cryptocurrency, Shiba Inu would also likely benefit if the crypto industry bounces back. For that to happen, the Federal Reserve will need to end its intense interest rate hikes that have gone on all year. Rate hikes make riskier assets less appealing, and few assets are riskier than cryptocurrencies, which are harder to value than stocks.
Additionally, I think the FTX debacle is going to need to play out further before investors regain faith in the sector. The large crypto exchange’s demise has affected many other big crypto companies. Investors are going to want to see this contagion contained.
Will Shiba Inu hit a $10 billion market cap in 2023?
You never say never in crypto land, but I think it’s doubtful that Shiba Inu more than doubles and reaches a $10 billion market cap. Instead, it’s more likely that crypto investors will spend the first half of the year dealing with macro issues such as cooling inflation and the last few interest rate hikes.
I think the Fed will likely end its rate hikes in the first half of 2023, which will be positive for crypto. But I have no idea how long it will take to get the contagion from the FTX debacle in check and for investors to get their confidence back. I do think it will happen eventually and that crypto is ultimately here to stay. I just don’t know when or how long it will take.
It’s also important to remember that the Fed is currently unwinding its balance sheet and pulling liquidity out of the financial system, which means fewer funds to flow into risky assets. Ultimately, while the price of Shiba Inu could rise in 2023, it’s a lot to ask to expect it to double.