Understanding Token Burns: Clarification on Price Impact

"It's burning, but price not moving!" 


A common question that comes our way is "Why isn't the price moving after massive burns?" At this moment, burns are unlikely to significantly impact the price without continuous and substantial token purchases used for burning to match the current purchase rate. Burning 10 billion tokens in a week will not impact the price when there are far larger transfers being purchased daily and prices have just sustained. The price isn't solely determined by burns. A new token can burn 90% of their supply, but if there's no demand for that token, not much holders, has a small amount of liquidity, then it doesn't hold much value. Example, If a developer makes a token of 10B tokens and add only $1k in liquidity, they can purchase half of the supply with just $500. If they decide to burn it, there won't be any change unless there is demand. Supply and demand have always been the key factors for price movement, and this principle has held true for centuries. For instance, if the demand for the token surges, and more people start buying it. As a result, the available supply reduces due to the burning process, creating scarcity. This increased demand and decreased supply can positively influence the token's price, making it more valuable to traders and investors. The top 100 accounts (excluding the burn address) for $SHIB hold near 400T of the token's supply, mostly by centralized exchanges. Keep in mind there are 1,323,659 addresses. Price can still go up based on demand. Imagine if everyone is holding the entire supply, and more people continue to buy, increasing the demand for the token, CEXs will start looking to buy more, price goes higher. Especially in a bull market.


A token's success doesn't always mean reaching a specific price, like "$0.01." It's definitely something we would all love to see, but many have their own price goals. Some have already took profits because today's price was their price goal. Why not wait and see how things go as more people adopt it, more projects are built, and the cryptocurrency space keeps growing? Rather than waiting for others to take action, why not actively participate or initiate something that contributes to the token? We strongly disagree with those who claim that burning has no effect without understanding how it actually works. Think of burning as if a whale were trying to buy a massive amount of the token's supply, except this whale will never sell. Those tokens remain locked forever. So, how can that not have an impact? Dismissing the importance of burning without considering its implications may overlook its significant role in the token's growth and value.


A list of the top burns with their corresponding prices on the day of transfer was tweeted last week, to draw your own conclusions (You can find it here). Since April 5, 2021, before VB's burn, the price of $SHIB skyrocketed by 1128%, and it has continued to remain consistently above 118% higher than before (over 2 years). To drive significant growth, SHIB would benefit from increased adoption and growing demand. If the supply continues to shrink and the token becomes scarcer, then the price can climb, but this still takes time and can be a long-term process. Let's not blindly believe claims like "it will take thousands of years to burn the supply and therefor it’s going nowhere” or that it needs to "burn the entire supply" for it to be successful. We don't control other people's opinions or what gets written in blogs, but don't believe everything you hear. Out of over 23,000 cryptocurrencies, $SHIB proudly stands tall in the top 20 (#18). Some of those who claim SHIB is dead because of current price might need to wipe their crystal ball, because they can't see that far into the future. SHIB is just 2 years old, and it's still early days. Remember, a lot of what's being built hasn't yet been released.


Crypto is still growing, and we've seen significant progress in terms of the number of crypto holders worldwide. Further growth is inevitable, it can reach 8% or more. Consider the potential impact when giants like Google and Apple fully adopt cryptocurrency. Take a close look at Amazon and how long it took for them to experience significant growth. Can SHIB do the same? I believe any token that keeps building can do the same. When people lose hope, token lose momentum, interest fades, people start trading for other tokens, then it can affect it's value. So, as long as SHIB remains active, retains community interest, and continues to be adopted, the potential for growth is limitless.


Disclaimer: Nothing mentioned here is to be taken as financial advice, please DYOR.






Updated on 7/24/2023

We've made a clarification regarding the impact of burns on the token's price. In our previous post, we mentioned that burns need continuous and substantial token purchases to match the current purchase rate for significant price impact. To make this clearer, we've added 'used for burning' to the sentence. Burns alone may not have a substantial effect on the price unless they come close to the current purchase rate. We also added more context tokens that burning 90% without demand. We hope this update provides better understanding.

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