Shiba Inu (SHIB) price is underperforming, but here are four reasons why that could change soon

The second largest meme coin by market cap — Shiba Inu (SHIB) — has underperformed lately, with its price falling 9% weekly (Coingecko data).

In the following lines, however, we’ll outline some important factors and indicators that suggest a new resurgence could be on the cards.

The combustion rate

The Shiba Inu team implemented the combustion mechanism in 2022, aiming to reduce the huge circulating supply of the meme currency. The process involves sending SHIB to a null address with each transaction. This promotes scarcity and could, in theory, increase the value of the remaining tokens (assuming demand stays the same or increases).

Over the past few days, the burn rate has increased. The data shows that around 60 million tokens have been destroyed in the last 24 hours, a 500% increase compared to the figure seen on July 22.

More than 41% of the initial supply has already been burned, leaving roughly 583 trillion SHIB tokens in circulation (at the time of writing).

Abandon exchanges

Another item worth mentioning is the net flow of SHIB exchange. Outflows have significantly exceeded inflows in the past 30 days, indicating a shift away from centralized platforms to self-custodial methods. This is generally considered bullish on price as it relieves immediate selling pressure.

We recall that a similar trend was observed at the beginning of March, when the Shiba Inu valuation experienced a real bull run, increasing by three digits in a few weeks.

Open interest

Shiba Inu open interest (the total number of outstanding derivative contracts, such as futures or options, that have not been settled) exceeded $30 million last week, hitting a one-month high.

An increase in open interest typically indicates greater market participation, meaning more traders are jumping on the bandwagon. It is often a precursor to greater volatility and violent price movement in either direction.

While this metric doesn’t necessarily mean good news, it’s usually a precursor to a substantial move. If the broader market remains in a rally, it could play into the SHIB bulls’ hands.

The progress of Shibarium

Last but not least, it is important to take a look at the advancement of the Shibarium layer 2 scaling solution. It was launched about a year ago and has since passed numerous milestones.

For example, the protocol has processed more than 400 million transactions and produced more than 5.5 million blocks.

Shibarium’s main goal is to foster the development of the Shiba Inu ecosystem by reducing transaction costs, improving speed and improving scalability. Some industry participants believe that its further progress could have a positive impact on SHIB’s price.

For more updates on the topic, be sure to check out our Shibarium News.

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