Shiba offers an efficient means of transferring money over the internet and is controlled by a decentralized network with a transparent set of rules. Shiba and other digital currencies have been touted as alternatives to fiat money. But what gives any type of currency value?
Shiba Inu Coin (SHIB) has joined the ranks of highly used cryptocurrencies that provide efficient means of sending and receiving money globally through the internet which is not controlled by any intermediaries. Thus, SHIB has presented the world with an alternative way of going about our day-to-day financial activities which are in direct competition with central bank-controlled fiat money.
After parent crypto Bitcoin crossed $20,000 per coin for the first time in December 2017, various regulatory bodies began to question the threat of digital currencies in the mainstream. One of the areas that caught the attention of financial institutions is how to price cryptocurrencies such as Shiba Inu.
In this feature article, we are going to explore the potential price of SHIB in the future in the event cryptocurrencies achieve mainstream adoption. Shiba Inu and other cryptocurrencies such as Ether (ETH), BTC, Cardano (ADA), Tronix (TRX), Dogecoin (DOGE), Litecoin (LTC), and Dash (DASH), etc., have been touted as alternatives to fiat money. This has given birth to the question, what gives any type of currency value whether digital or fiat?
Key Takeaways
- Currencies have value because they play the roles of a medium of exchange and a store of value.
- Successful currencies have key six key characteristics which are durability, transportability, divisibility, scarcity, counterfeitability, and utility.
- The Shiba Inu Coin commands a great value because it meets all the six attributes of successful currencies. The only pitfall it has is its status as a unit of exchange. This is because cryptocurrencies continue to struggle to gain mass acceptance as an option of payment by well-established businesses.
- Two attributes (utility and transferability) are mostly challenged due to the difficulties of storing cryptocurrencies as well as the complexity of exchanges.
- However, if Shiba Inu’s ecosystem continues to thrive through the launch of new innovative products, Shiba can capture a substantial part of the cryptocurrency market if there is a huge spike in its price. This is because more than 300 trillion SHIB coins are circulating in the market. If Shiba should test $1 someday, its market value could total more than $300 trillion.
Why Currencies Have Value
The usability of a currency is upheld if it also functions as a store of value. To put it another way, if a currency can avoid depreciating and maintain its relative value over a given period, it can be categorized as valuable. Throughout history, several societies across the Americas, Europe, Middle East, Asia, and Africa used commodities (wheat, corn, etc.) and precious metals (gold, silver, etc.) as methods of payment. This was because they were seen as an asset class with a relatively stable value.
After seeing the human labour involved in the exchange of goods such as carrying loads of gold, cocoa beans, or the stress in getting goods from one place to the other, society shifted their attention towards creating a minted currency as an alternative.
The usability of minted currencies gained widespread attention and acceptance as a store of value because they were made out of small quantities of metals. Since metals have a long shelf life, the risk of depreciation was reduced to the barest minimum.
In contemporary times, paper money dominates minted currencies although it does not have the same intrinsic value as minted coins which were made from precious metals. As time passed by and a technological revolution took over the world, various forms of electronic currencies and payment methods were introduced.
Most paper monies became known as “representative money”. What this means is that it is a medium of exchange that represents something of value, but has little, or no value of its own. Therefore, as analyst John Kelleher of Investopedia puts it, “Each coin or note can be directly exchanged for a specific amount of commodity.”
When several countries such as the United States abandoned the gold standard on 15th August 1971 to allay the fears of citizens who showed keen interest in federal gold supplies, many global currencies became known as fiat.
Fiat currencies such as the United States Dollar (USD), Great Britain Pound (GBP), Japanese Yen (JPY), and Chinese Yuan (CNY) among others are issued by a government through its central regulatory body. Fiat currencies are not backed by any commodities or precious metals. Instead, they are backed by the faith and mutual understanding of individuals that they can be used to pay for goods and services.
In the 21st century, countries with the highest gross domestic product (GDP) use fiat currency. Many governments of well-established countries such as the United States and the United Kingdom through studies conducted over time have realized that fiat currency is the least likely to be susceptible to deterioration of loss of value over time. This is due to its durability as a medium of exchange and store of value.
Scarcity, Divisibility, Utility And Transferability
For a currency to be categorized under the most successful, it must be able to meet certain attributes such as counterfeitability, utility, transportability, divisibility, durability, and scarcity, aside from being questioned as a store of value. Let’s delve into these attributes one by one.
1. Scarcity
According to the laws of demand and supply, when demand exceeds supply, the price of an asset goes up and when supply exceeds demand, the price of an asset goes down.
It can be deduced from the basic law of economics that the value of a currency is highly dependent on the level of its SUPPLY. If there is too much supply of money in a particular system, the resultant effect is a spike in the price of goods.
In most cases, such a system collapses (a great example of this can be attributed to the economic collapse of Zimbabwe due to too much supply of the Zimbabwean dollar that led to extreme inflation and hyperinflation).
On the other hand, an economic system that experiences little supply of money can also result in economic problems. This has led to the creation of concepts such as Monetarism to address the pressing needs of money supply in the economic growth and development of countries.
The constant printing of fiat currencies by numerous central banks has been found as one of the best ways by which scarcity could be controlled. While developed economies have a preset amount of inflation which serves to drive the value of the fiat currency down, other developing economies do not have such a preset amount.
This sees their currencies involved in constant depreciation in exchange rates with developed economy-backed currencies.
This is different from Shiba Inu which boasts a flexible issuance rate that changes over time due to the number of coins being mined and added to the circulating supply.
2. Divisibility
For a currency to be considered as successful, it should be able to be divided into smaller incremental units. The value of goods and services on a particular market comes with different prices. As a result, for a single currency to successfully function as a medium of exchange across all spheres of life, it must be flexible enough to be divided.
To help you understand divisibility, let us take a look at non-fungible tokens (NFTs). NFTs cannot be divided into smaller denominations. Once an NFT crypto art is purchased, it comes with unique features. This means it cannot be interchanged for or with any other thing. As analyst Ollie Leech at Yahoo Finance puts it, “They exist exclusively as a whole item.”
Economically, the divisibility of any given currency is paramount as it helps give an accurate measure of the real value of goods and services. Mathematically, divisibility happens this way.
With fiat currency (EUR, GBP or USD), you can swap $100, £100, or €100 notes for two ($50, £50, or €50) and it would result in the same value.
With cryptocurrencies, you can purchase half of 1 Shiba Inu token which would be represented by 0.5 SHIB, and purchase another half at a later time. The two (2) can be exchanged for 1 SHIB since (0.5 + 0.5) would result in 1.
3. Utility
No currency can gain mass acceptance without its usefulness to a population. The utility of a currency cannot be called to question if the populace reliably trades units of it for goods and services. This is the main reason why currencies were created to help people avoid having to carry loads of goods or engage in barter trade.
One of the primed ways of measuring a currency’s utility is its ability to be moved from one location to the other quickly and easily. Commodities and precious metals could not be moved to places in a short period and it’s the reason why currencies were created to replace them.
4. Transportability
For currencies to become a mainstay and household item, moving them between participants in a given system must be easy for its usefulness to be upheld. In the case of fiat currencies, units of a particular currency, let's say, the United States Dollar (USD) must be transferable between other nations via exchange. It must also be transferable internally to be able to support the economy.
5. Durability
When you go out to buy products, you always watch out for those with a long lifespan which will give you value for money. That is the primary reason why companies that produce similar products have different returns on investments. Some have ROIs due to sales from customers who prefer the quality (durability) of their products. It is the same with currency.
If a currency is not made out of materials that cannot be easily damaged, mutilated, or destroyed, it will reach a point where it becomes unusable. This is the primary reason why a currency must be deemed durable by its users to confer success on it.
6. Counterfeitability
The durability of a currency is mostly linked with its ability to resist duplications. Once an individual or group of people can create fake bills, a particular currency fails to remain effective.
A great example can be attributed to the creation of fake 100 Canadian dollar bills which flooded Ontario and Quebec in 2001. Most of the residents felt they had money in their wallets until they made attempts to purchase goods and services at stores. Stores wanted money but 100 Canadian dollar bills were not accepted.
This created a stir in the country and it took a long period before citizens found faith in the $100 note.
To assess the value of Shiba Inu as a currency, we will compare it against fiat currencies in each of the above categories.
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Shiba Inu Coin Compared Against Fiat Currencies
1. Scarcity
When Shiba Inu launched in 2020, its whitepaper which they termed as woofpaper, revealed that the total supply of tokens would be capped at 1,000,000,000,000,000 (1 quadrillion).
To break down the technicalities and mathematics, the current supply of SHIB is around 549,063.28 trillion.
According to the official online address of the Shiba Inu project, 50% of the total token supply which stands at 500,000,000,000,000 (500 trillion) has been locked on decentralized exchange Uniswap with the keys to those tokens thrown away.
The other 50% was sent to Vitalik Buterin and he donated a substantial number of the coins to India’s Covid-19 Relief Fund and burned the rest.
Using simple mathematics, SHIBs total supply has moved from 1 quadrillion to 500 trillion. The current circulating supply represents 79% of SHIBs mined. This means that the 21% coins left are in the region of 105,204,000,000,000 (105 trillion).
A crypto whale bought 150,000,000,000 (150 billion) Shiba Inu Coins on 6th September 2021. If SHIB continues to be purchased in such a bulky way, it wouldn’t be that long till scarcity takes hold of it. As students of the basic laws of economics, we all know what happens to the price of an asset when it becomes scarce.
Shiba Inu Coin’s supply approach is practically different from most fiat currencies. You should know that the global fiat money supply has been broken down into different categories by financial experts. The categories are M0, M1, M2, and M3.
Currency in circulation is referred to as M0.
Demand deposits such as checking accounts plus currency in circulation (M0) are called M1.
Small-time deposits, savings accounts plus demand deposits (M1) are known as M2.
Money Market Funds plus large-time deposits are referred to as M3.
These categories of global money supply can be classified as a store of values or medium of exchange.
Because large-time deposits and small-time deposits are ways of locking up money so that it will appreciate through annual percentage yields (APYs), we would put M2 and M3 under the store of value banner.
Because checking accounts and currency in circulation are used by residents to go about their day-to-day activities, we would put M0 and M1 under the medium of exchange banner.
Most governments as part of their monetary policy maintain some form of control over the supply of currency in circulation. The regulatory body in charge of a country’s finances uses economic factors to make adjustments to the flow of money. This is not the case with Shiba Inu.
Presently, a robust mining community has sprung up all over the internet. This is due to the continued availability of the generation of more tokens. This community will dry when all Shiba Inu Coins are mined.
Since no large-cap cryptocurrencies (Bitcoin, Ether, and Litecoin) have reached a state where the total supply of tokens is mined, no one knows what will happen if all SHIBs are mined.
With more than 17,000 crypto coins on the market screaming for buyers, the last SHIB will take a long time to be mined since there are more than 105 trillion coins still locked up.
What we know for sure is that scarcity of SHIBA coins will lead to a spike in its valuation. This is evident in precious metals such as gold.
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
2. Divisibility
Notably, on a global level, 1 quadrillion Shiba Inu coins is vastly larger than the total supply of most cryptocurrencies and flexible supply of fiat currencies. Fortunately, SHIBA has the feature of divisibility. This will make it possible for beginners who do not have large sums of money to invest in a full Shiba Inu Coin, assuming its price attains the levels of Binance Coin (BNB), Ether (ETH), or Bitcoin (BTC) in the future.
In this case, more coins of individual units will be distributed through the economy of cryptocurrencies.
On a larger scale, cryptocurrencies, in general, have a larger degree of divisibility than the Euro (EUR), Great Britain Pound (GBP), and the United States Dollars (USD) as well as other fiat currencies. You must note that divisibility plays an integral role in how scarce cryptocurrencies such as SHIB can become.
In the event, SHIBA surpasses the expectations of analysts and experts and tests new all-time highs, users with tiny fractions of the token will still be able to use their coins to go about their daily financial activities.
To give you an example of how important divisibility is to digital assets, if SHIB reaches the price of $10,000, many people will not use the digital currency in their transactions. This will take away the medium of exchange attribute needed for a currency to be considered successful.
3. Utility
One of the biggest selling points of Shiba Inu has been its use of the Ethereum Network as the pioneer of smart contracts and decentralized finance. Ethereum employs blockchain technology.
As a result of the revolution Vitalik Buterin's innovation has caused in the financial markets, blockchain technology has gained a huge fan base due to it being a distributed ledger system that is decentralized and trustless.
Since parties participating in the Ethereum Network do not need to establish any forms of trust in one another before the protocol can work, millions of developers including Shiba founder (RYOSHI) patronized the network because of its innovative products such as smart contracts.
The Shiba Inu ecosystem now boasts of a protocol that facilitates transactions in a trustless and permissionless manner and a decentralized application (DAPP) in the form of a decentralized exchange (DEX) called Shibaswap.
The developers of the ecosystem made its native asset, SHIB compatible with all the DAPPS on Ethereum. Therefore, SHIB continues to be used across decentralized lending, exchange, insurance, and yield aggregation applications in addition to its Shibaswap exchange.
Aside from this, the number of daily transactions Shiba Inu continues to be involved in signals that it has utility outside of the Ethereum Network.
4. Transportability
The inception of cryptocurrency exchanges and crypto wallets such as Trust Wallet and MetaMask which lists SHIB for trading, has made it easy to transfer SHIB between parties within minutes. Such transactions happen regardless of the number of coins involved and they come at low costs.
In the current traditional financial setting, the process of transferring money can take days. What’s more, cross-border payments come with hidden fees since it sometimes goes through several channels such as central banks, insurance companies, and clearinghouses before transactions can be completed. As earlier stated, transferability is a key attribute of a currency's success and Shiba Inu has this distinct feature.
It is a known fact across crypto circles that it takes high energy emissions for mining on proof-of-work (POW)-backed blockchains. Yet still, the Shiba Inu protocol can process several transactions. You should know that at the moment, individual Shiba holders do not have any physical representation of the tokens.
5. Durability
SHIB, as a digital currency is not susceptible to physical damages in the form of being torn or burned like paper money, is used to. As a result, SHIBs are extremely valuable. It cannot be destroyed the same way fiat currencies could be.
There are complex processes involved such as sending the tokens to an address that cannot be retrieved in what is called token burning. Even if such burns happen, it has a positive impact on the price of the token because it brings about scarcity.
That does not mean that your Shiba Inu holdings cannot be lost. When you create new wallets on TrustWallet and MetaMask, you will be given passcodes which are normally 12 words arranged in a particular order.
If you lose your private keys, your wallet could be locked up forever. However, the Shiba Inu coins will be available in the records of the protocol.
6. Counterfeitability
Unlike paper money that has been mired with counterfeiting controversies, due to the complication of blockchain technology and the security of the Ethereum Network, SHIBs are difficult to counterfeit.
Although several attempts can be made in what is termed double-spending, a counterfeiter (in this case, a hacker) must gain 51% of the network’s power. This would require hackers with millions of dollars.
Considering the result of hacking is to take off with a large number of SHIBs that can be converted to paper money (USD), this attempt has been rendered highly unlikely since the risks outweigh the rewards.
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Shiba Inu Challenges
Generally, when compared to fiat currencies, Shiba Inu ticks all the above categories. With that said, no currency is perfect whether fiat or crypto. So, what are the challenges facing Shiba Inu as a currency?
One of the biggest challenges Shiba Inu faces is its quest to be seen as a store of value through its use as a medium of exchange. As we discussed earlier, cryptocurrencies do not have any intrinsic value. Thus, they are not backed by any physical commodities or gold as a precious metal. It relies on the faith its fans continue to have its ecosystem which controls its price. This is why SHIB and other cryptocurrencies aside from being categorized as a highly volatile asset class are also called speculative assets.
When you consider the fact that SHIB has returned more than 4,000,000% in 2021, you should know that the token is trading in a bubble. What normally follows a bubble in investment circles, is a crash.
The future of cryptocurrencies is uncertain so no one knows if SHIB will still be trading in the next few years, or if the whole Shiba Inu ecosystem is going to collapse.
In addition to this, numerous reports of exchange hacks, thefts, and several meme-inspired currencies being used in frauds have brought question marks around SHIB's utility and transferability attributes.
Because of the unregulated nature of cryptocurrencies, suppose something should go wrong in terms of a loss of private keys or suspension of accounts on exchanges due to security threats, holders cannot hold anyone accountable.
Also, several countries have expressed reservations about the widespread adoption of cryptocurrencies as transactional currency. Fronting these countries is China which continues to issue statements on a wide crackdown of the digital currency market. As a result, SHIB and other tokens are just living on thin ice.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Shiba Inu Worth Versus Rival Fiat Currencies
To place value on Shiba Inu, we need to project the potential of SHIBs price based on the possibilities of its ecosystem. The simplest way to compare the worth of SHIB to other fiat currencies is to look at the value of all stores of value and mediums of exchange compared to the Shiba Inu Coin. After that, we can calculate the value of SHIB’s projected percentage.
As per data retrieved from the Federal Reserve Bank of St. Louis, M1 (Currency in circulation and demand deposits) is currently valued at approximately $4.9 trillion. This statistic represents the global valuation of mediums of exchange.
M3 (which comprises money markets and large deposits) is valued at approximately $45 trillion. Gold also functions as a store of value. As the time of writing the market capitalization of Gold stands at $11.362 trillion.
Overall, the total valuation of M3 ($45,000,000,000,000) plus gold ($11,362,000,000,000) equals $59,595,000,000,000 ($59.362 trillion).
Trading Education’s estimate for the global value of stores of value and mediums of exchange comes to a valuation of $61,495,000,000,000 ($61.495 trillion).
If Shiba Inu increases to test a new all-time high of $1 someday, the total supply of SHIB (500 trillion coins) due to the burning of the other 50% by Vitalik Buterin, multiplied by 1 would take the market capitalization of SHIB to $500 trillion.
Difficulties Of Valuing Shiba Inu
The real worth of Shiba Inu can be valued with a view on the long term. Perhaps the biggest question that needs to be answered is, how much adoption will Shiba Inu achieve as an ecosystem and digital currency for settling transactions online?
For us to value Shiba Inu, we must include risk factors that can slow its adoption such as being in a saturated market where more than 11,000 crypto projects daily fight for the same virtual numbers.
On the other hand, the Shiba Inu ecosystem has surpassed all meme-inspired crypto projects including Dogecoin.
While Dogecoin and the others only function as transactional currencies that rely on partnerships through integrations to benefit from activities on decentralized applications, SHIBA's utility could be seen directly on all the DAPPS running on the Ethereum Network. Moreover, the Shiba Inu Community is one of the loudest fans in the space that continues to expose the Shiba project to sceptics.
If Shiba Inu continues to dominate headlines across financial news portals, maintain the bulk of purchase by crypto whales, expand its ecosystem so that Shiba applications would be created, the projected value of Shiba could reach the current market value of BTC and at best, gold.
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