Shiba Inu in liquidity squeeze – end of the road for SHIB?

• Investors overlooked contributing to ShibaSwap’s TVL.
• SHIB’s volume remains unimpressive while its price shredded significant numbers in the last 90 days.

At the height of the 2021 bull market, Shiba Inu [SHIB] was at the forefront of leading price rallies. This performance, and the attention it gained, led ShibaSwap’s Total Value Locked (TVL) to hit as high as $1.75 billion.

For the unfamiliar, ShibaSwap is the native Decentralized Exchange (DEX) of the Shiba Inu ecosystem. The TVL measures the way users provide liquidity to stake and swap tokens on the exchange. 

Unfortunately, the same TVL, which was in the billion-dollar range, had decreased massively. According to DefiLlama, ShibaSwap’s TVL was now $25.16 million.

Source: DefiLlama

No longer enticing to the big guns?

This depicts a situation where investors were no longer interested in adding volume to the smart contracts projects under the ecosystem. This affected ShibaSwap’s revenue and fees generated, all the while sparking speculation about a liquidity squeeze.

In crypto, a liquidity squeeze occurs when there is a lack of deposits and conversion in transactions in a cryptocurrency. Sometimes, this results from the lack of contribution by whales.

On evaluating on-chain data, Santiment revealed that investors who hold between 1-1,000,000 SHIB tokens have been increasing their balance. This implies that the retail cohort somewhat believes in the long-term performance of the meme.

However, it was a different situation with addresses that hold between 1,000,000-1,000,000,000 tokens. In this division, there were mostly cuts from the balances. 

Source: Santiment

This signifies profit-taking and a possible belief that SHIB may no longer produce the sort of performance when it came into the spotlight. 

Shrink in volume and wakening holders

As for the volume, it was only occasionally that the metric reached impressive levels. At press time, SHIB’s volume was down to 78.14 million.

This metric measures the level of trading activity of a cryptocurrency in the entire market. And when the volume increases, it signifies a high demand for the asset in question. But in SHIB’s case, it was the opposite. 

Furthermore, the dormant circulation, although minimal in the last 365 days, has been relatively frequent in the last 90 days. 

The metric shows the number of unique tokens transacted daily that have not moved in a long while. When blockchain data shows a notable spike in the metric, it means that long-term holders have moved a considerable number of tokens.

Source: Santiment

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And according to Santiment’s data above, SHIB’s 90-day dormant circulation hit trillions several times between March and the time of writing. Thus, there was a possibility that these tokens were moved into exchanges.

At press time, SHIB exchanged hands at $0.000009. This represented a 23.09% decrease in value in the last three months.