In the volatile world of cryptocurrency, meme coins like Shiba Inu (SHIB) and Pepe (PEPE) have garnered significant attention due to community appeal and the potential for sudden growth. However, many investors set a $1 target for these coins without realizing that this is nearly impossible. Below is a detailed analysis of why this expectation is hard to achieve and the key factors that investors should consider when setting profit targets for meme coins like SHIB and PEPE.
The Relationship Between Market Capitalization and the Price of a Coin 💰
To understand the actual value of a cryptocurrency, we need to grasp the relationship between market capitalization and circulating supply. The basic formula is:
Value of the currency (Price) = Market Capitalization (Market Cap) ÷ Circulating Supply
Each coin will have a specific amount of circulating supply on the market, and its value is determined based on total market capitalization. Therefore, when the price of a cryptocurrency rises, its market capitalization will also increase correspondingly, creating significant pressure on the market if the circulating supply is too large.
For SHIB and PEPE to reach a price of $1, their market capitalizations would need to reach a gigantic figure, greater than the entire current cryptocurrency market capitalization (around $2.5 trillion USD). This makes the $1 target difficult to achieve.
Detailed Analysis of Shiba Inu Coin (SHIB) 🐕
1. Current circulating supply of SHIB: 589.27 trillion SHIB
2. Necessary market capitalization to reach $1: $589.27 trillion USD
Unrealistic Reasons:
Necessary market capitalization too large: To reach $1 per SHIB, the market capitalization of this coin would need to reach $589.27 trillion USD. This is about 230 times the current total cryptocurrency market capitalization. For comparison, the current market capitalization of Bitcoin is approximately $600 billion USD, and the total cryptocurrency market capitalization is around $2.5 trillion USD. For SHIB to reach $1, the entire global economy might even have to focus on SHIB, which is clearly unrealistic.
Challenges at the $0.01 target: Even if SHIB sets a more modest target of $0.01, the necessary market capitalization still reaches $5.89 trillion USD, a very difficult figure to achieve in the current context.
Enormous circulating supply: With a circulating supply of up to 589.27 trillion coins, SHIB faces a significant barrier to increasing its value. This is because to achieve a high price, the circulating supply needs to decrease through activities like token burning - meaning removing a portion of the supply to increase the coin's value.
Detailed Analysis of Pepe Coin (PEPE) 🐸
1. Current circulating supply of PEPE: 420.69 trillion PEPE
2. Necessary market capitalization to reach $1: $420.69 trillion USD
Unrealistic Reasons:
Market capitalization too large to reach $1: For PEPE to reach a value of $1, its market capitalization would need to increase to $420.69 trillion USD, which is 168 times higher than the current total cryptocurrency market capitalization. This is an unreasonable demand compared to the largest coins today.
The $0.01 target is still too high: If PEPE sets a lower target of $0.01, the necessary market capitalization would still need to reach $4.21 trillion USD, equivalent to double the total market capitalization of Bitcoin and Ethereum combined. This is also unrealistic considering the competition in the cryptocurrency market.
The impact of a large circulating supply: Similar to SHIB, PEPE also has a very large supply, making it difficult to increase value unless there is a large-scale token burn plan to reduce supply.
Some Factors to Consider When Investing in Meme Coins 🚀
1. High Volatility and Significant Risks:
Meme coins often have high volatility, which poses significant risks for investors. Investing in these currencies requires mental preparation to face unpredictable fluctuations.
2. Community Strength and Viral Nature:
Shiba Inu and Pepe are boosted by community strength and meme trends on social media. Short-term price increases may come from viral outbreaks or community-driven price pushes, but these are hard to sustain in the long run.
3. Token Burn Potential:
One way for coins with large circulating supplies to increase value is through token burning, which reduces supply to increase price. However, the scale of this activity would need to be substantial to significantly impact the value of SHIB and PEPE.
4. Realistic Investment Strategies:
Investors need to have a realistic view of achievable value, rather than focusing on unrealistic targets like $1. Clearly define short-term and long-term investment goals based on technical analysis and market trends, rather than solely relying on expectations of high returns.
Conclusion: Consider Realism When Setting Profit Targets 📉
Although Shiba Inu and Pepe coins may continue to grow in the short term thanks to community support, expectations of a price of $1 or even $0.01 are unrealistic. Investors need to understand the relationship between market capitalization and circulating supply, while maintaining a realistic outlook and managing risks when engaging with meme coins. Focus on more realistic short-term and long-term growth potential to make informed investment decisions. 🎯