Shiba Inu's Stalled Burn Mechanism and Escalating Liquidation Risk: A Looming Bearish Catalyst in Meme Coin Markets

The Shiba Inu (SHIB) ecosystem, once a symbol of meme coin optimism, now faces a critical juncture as its deflationary burn mechanism falters and leveraged trading positions teeter on the brink of collapse. While the token's proponents tout its aggressive token-burning campaigns as a path to scarcity-driven value, recent data reveals a stark disconnect between supply reduction and price performance. Simultaneously, the surge in leveraged positions has created a fragile market structure, where even minor price fluctuations could trigger cascading liquidations. Together, these factors form a potent short-term bearish catalyst for SHIB, threatening to undermine its nascent recovery and expose the vulnerabilities of meme coin markets.

The Burn Mechanism: A Pyrrhic Victory for Supply Reduction

Shiba Inu's burn mechanism, designed to reduce circulating supply by sending tokens to dead wallets and the Ethereum genesis address, has seen dramatic percentage increases in Q3 2025. For instance, a single 24-hour period saw a 3,915,071% surge in the burn rate, with 21.61 million SHIB tokens destroyed. Over November 2025, 163 million tokens were burned, reducing the circulating supply to 585.26 trillion SHIB. However, these figures mask a critical flaw: the absolute volume of tokens burned remains insufficient to meaningfully impact the token's vast supply.

Moreover, the burn activity has become increasingly erratic. While the seven-day aggregate burn rate dropped by 62.99% in late November, a complete halt in burning occurred in the past 24 hours, despite SHIB's price decline. This inconsistency undermines the mechanism's credibility as a tool for price stabilization. Analysts argue that sustained, predictable burning is necessary to create lasting scarcity, yet SHIB's current approach resembles a "whack-a-mole" strategy, where isolated spikes in burning fail to offset the token's structural challenges.

Leveraged Positions: A Time Bomb for Price Stability

The risks extend beyond supply dynamics. Shiba Inu's price volatility has attracted leveraged traders, creating a precarious balance sheet for the market. According to CoinGlass data, long positions face maximum liquidation risk at $0.00777, while short positions are vulnerable near $0.0086. At the time of writing, SHIB trades at $0.000007087, perilously close to these thresholds.

Recent liquidation data underscores the fragility of this equilibrium. Over the past 24 hours, $58,000 in leveraged positions were liquidated, with 85.44% attributed to longs. This trend is exacerbated by SHIB's thin order books and the interplay between burn activity and leveraged trading. For example, a 859% surge in the burn rate over 24 hours coincided with sharp price swings, further destabilizing the market. The RSI indicator, currently in oversold territory, suggests that a breakdown below key support levels could trigger a 20% price drop, compounding the liquidation risks.

Macroeconomic and Ecosystem-Wide Pressures

The challenges facing SHIB are not isolated. Broader macroeconomic factors, such as waning retail sentiment and the potential for a Fed rate cut, add layers of uncertainty. In late 2025, the crypto market witnessed $1.7–2.0B in Bitcoin leveraged liquidations, highlighting systemic risks that could spill over to meme coins like SHIB. Additionally, SHIB's ecosystem faces headwinds from its large circulating supply on exchanges, which acts as a persistent sell wall. While initiatives like Shibarium's expansion and DeFi integration are critical for long-term growth, their impact remains unproven in the short term.

Conclusion: A Perfect Storm for Short-Term Bearishness

Shiba Inu's stalled burn mechanism and leveraged position risks create a self-reinforcing cycle of downward pressure. The token's deflationary strategy lacks the consistency and scale needed to drive meaningful price appreciation, while leveraged traders amplify volatility through forced liquidations. For SHIB to break free from its bearish trajectory, it must address both structural supply-side issues and the fragile demand-side dynamics created by speculative trading. Until then, investors should brace for further turbulence in a market where optimism and fragility walk hand in hand.