During the 2021 bull market, Shiba Inu attracted significant attention and spearheaded price rallies. This surge in popularity propelled Shiba, the native decentralized exchange (DEX) of the Shiba Inu ecosystem, to achieve a Total Value Locked (TVL) of a staggering $1.75 billion.
TVL measures the liquidity users provide for staking and swapping tokens on the exchange. However, the same TVL that once boasted billion-dollar figures had plummeted drastically. According to DefiLlama, ShibaSwap’s TVL currently stands at a meager $25.16 million.
This sharp decline signifies a lack of investor interest in contributing volume to the smart contract projects within the Shiba Inu ecosystem. A liquidity squeeze occurs when there is a scarcity of deposits and conversion in transactions within a particular digital asset. Sometimes, this could be attributed to a lack of participation by influential investors, commonly called whales.
Analyzing on-chain data, Santiment, a leading analytics platform, discovered that retail investors holding between 1 and 1,000,000 SHIB tokens had increased their balances. It suggests that this group still holds some faith in the long-term performance of the meme-based cryptocurrency.
For addresses holding between 1,000,000 and 1,000,000,000 tokens, there have been significant reductions in balances, indicating profit-taking and a growing belief that SHIB might no longer deliver performance. SHIB has seen occasional spikes, but overall, the metric has decreased. At the time of reporting, SHIB’s trading volume stood at a modest $75.18 million.
In addition to Shiba Inu’s liquidity squeeze, another cause for concern arises from the recent rise in dormant circulation. While dormant circulation remained minimal over the past 365 days, Santiment’s data reveals a relatively frequent surge in the last 90 days. The analytics platform’s findings indicate that SHIB’s dormant circulation reached trillions between March and the present.
