Shiba Inu (SHIB) is a widely acclaimed crypto token based on a meme. Although recently it experienced a tremendous bull rally, its total value locked (TVL) has since dropped by an astonishing 70%. Notably, the largest pool of this currency (SHIB-WETH) on Uniswap V3 had peaked at an all-time high of $10.8 million in TVL, yet now stands at $1.8 million. Interestingly, there is an increasing annual percentage yield (APY) in the same pool.

When liquidity is low in decentralized exchanges (DEXes), it can have a negative effect on traders and investors. This is because low liquidity levels tend to create higher volatility, henceforth discouraging participants from engaging with the token. Additionally, people may be discouraged to take part in the market due to increased slippage rates and wider bid-ask spreads.

Although there is still a glimmer of hope for investors as there is an escalating APY in the SHIB-WETH pool, it is essential to understand the inherent risks related to the providing liquidity of assets, like SHIB, that are inherently volatile. Total losses may in such cases be severe, specially when considering SHIB's previous performance.

Still, multiple aspects need to be in place for Shiba Inu to emerge from its current liquidity crisis, for example, positive moves in its intrinsic ecosystem, escalating uses, and broader market support for meme-based cryptos. At the time of writing this, SHIB's price is trading oh $0.00001, witnessing a 5.8% dip from its local high.



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