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Although Shiba Inu has been one of the most talked-about meme tokens for a long time, investors cannot ignore the structural problems that lie beneath the hype. The enormous 84 trillion SHIB that is currently held in exchange reserves is one of the biggest warning signs. In this instance, reserves are more of an impending hangover on price action, even though they may initially imply liquidity and accessibility.
Constant SHIB pressure
The reason for this is that SHIB is just a sell-off away from severe price pressure, due to the significant concentration of supply sitting on exchanges. Reserves are liquid and available for use at any time, in contrast to coins that are kept in long-term or staking wallets. SHIB is particularly susceptible to market makers, whales and even widespread retail panic because of this. In reality, it establishes a psychological ceiling, since there is a chance that a sizable portion of those reserves will hit the market during each rally attempt.
Technically speaking, SHIB has been consolidating with decreasing volume in a descending triangle pattern. If demand isn’t sufficient to balance supply, such arrangements typically resolve downward. SHIB may be suppressed under important moving averages, such as the 200-day SMA, because of these bloated reserves. The price hasn’t broken above resistance levels in weeks, and buyers might be wary given the amount of supply hanging over the market. Investors should exercise caution in this environment.
Hidden risks
Ignoring exchange data in favor of chasing short-term pumps can result in liquidity dumps. Long positions with excessive leverage, or purchases made solely on the basis of hype without taking the structural supply issue into consideration, should be avoided at this time. The risk of a sudden decline is still high unless there is a noticeable decline in exchange balances, which would indicate that tokens are being burned or going into cold storage.
However, all is not lost. A relief rally might be triggered if SHIB can successfully exit its consolidation zone with high volume. Nevertheless, any increase might be limited until reserves decrease.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team