Shiba Inu(CRYPTO: SHIB) Could Not Have Performed Better for Investors a Few Years Ago

From the start of 2021 to its all-time high in late October that year, this digital asset absolutely skyrocketed. There are surely some very lucky speculators

In 2021, meme token Shiba Inu (CRYPTO:SHIB) was booming. It’s no secret that the cryptocurrency market was a hot topic throughout the pandemic era. With government-mandated lockdowns putting a dampener on social activities, people turned to the internet for entertainment.

In 2021, meme token Shiba Inu (CRYPTO:SHIB) was booming. It’s no secret that the cryptocurrency market was a hot topic throughout the pandemic era. With government-mandated lockdowns putting a dampener on social activities, people turned to the internet for entertainment.

This led to a surge in meme stocks and meme tokens. For instance, retail traders helped drive up the price of Peloton (NASDAQ: PTON) stock to an all-time high of $160 in January 2021. But by the time the Omicron variant hit in December of that year, the stock price had crashed to $38.

In the crypto world, meme tokens like Shiba Inu were also a hit with speculators. From the start of 2021 to its peak in late October of that year, this digital asset went up about 27,000%.

However, it’s been a different story since then. While the overall crypto market has held up well, despite the volatility, Shiba Inu has a lot of work to do to catch up to its former glory.

As of May 20, this meme token trades at $0.00001428, which is 84% below its peak from about three and a half years ago. Is it time to buy the dip with Shiba Inu? I think investors should look at both sides of the argument to gain a more thorough understanding.

Image source: Getty Images.

Hoping for a quick profit

As of this writing, Shiba Inu carries a market cap of $8.4 billion. This makes it the 16th largest cryptocurrency on Earth. This is a higher value than companies like Etsy (NASDAQ: ETSY) and Peloton.

A market cap of $8.4 billion is not easily achieved by any asset. For instance, if you were to add up the entire cryptocurrency market cap in January 2017, it would still be less than the market cap of Apple (NASDAQ: AAPL) today.

This fact alone highlights how strong the community support is for Shiba Inu. These supporters, known as the “Shib Army,” help to drive interest in the token online. Speculators understand that the community can lead to various hype cycles. And if the timing is correct, there’s a chance to achieve huge profits in a short period of time.

This fact alone highlights how strong the community support is for Shiba Inu. These supporters, known as the “Shib Army,” help to drive interest in the token online. Speculators understand that the community can lead to various hype cycles. And if the timing is correct, there’s a chance to achieve huge profits in a short period of time.

Shiba Inu can be viewed as a “Dogecoin killer.” That’s because it’s built to be compatible with the Ethereum network. This means that Shiba Inu has greater functionality than its dog-themed predecessor. Tokens can be used in decentralized exchanges, to trade non-fungible tokens, or within decentralized finance protocols. In theory, this raises utility.

What’s more, Shiba Inu’s developers are trying to increase adoption with various features. Shibarium, a layer-2 scaling solution, was introduced to speed up transactions and lower costs. A dedicated metaverse was also launched in December last year that allows users to interact in a virtual world. This might draw some excitement toward Shiba Inu.

Adding unnecessary risk to your portfolio

According to venture firm Electric Capital, Shiba Inu isn’t even on the list of top 100 cryptocurrencies when it comes to the number of developers actively working on it. This doesn’t bode well for its future, especially if you believe, like I do, that a cryptocurrency’s ultimate viability comes down to how much real-world utility it can introduce. This puts Shiba Inu at a major disadvantage.

The tokenomics also leave much to be desired. There are currently 589 trillion Shiba Inu tokens in circulation. That intentionally high supply base is the opposite setup of the scarcity Bitcoin possesses, for instance. This makes it all the more difficult for Shiba Inu’s price to steadily rise over time.

The tokenomics also leave much to be desired. There are currently 589 trillion Shiba Inu tokens in circulation. That intentionally high supply base is the opposite setup of the scarcity Bitcoin possesses, for instance. This makes it all the more difficult for Shiba Inu’s price to steadily rise over time.

There is a coin-burning mechanism in place to reduce supply. On May 19, though, only 49 million coins were burned. That’s not going to put a meaningful dent in the supply anytime soon, as it would take more than 16,000 years to burn half of the outstanding supply.

The fact that anyone can create a new token out of thin air poses a key risk for Shiba Inu, which is competition. The cryptocurrency industry remains the newest asset class out there. Consequently, it’s still characterized by unhealthy amounts of speculation among market participants. There’s no shortage of tokens to bet on in the hopes of getting rich quick. This increases the chances that people will move away from Shiba Inu one day onto the newly released shiny token.

The fact that anyone can create a new token out of thin air poses a key risk for Shiba Inu, which is competition. The cryptocurrency industry remains the newest asset class out there. Consequently, it’s still characterized by unhealthy amounts of speculation among market participants. There’s no shortage of tokens to bet on in the hopes of getting rich quick. This increases the chances that people will move away from Shiba Inu one day onto the newly released shiny token.

For long-term investors who want to own high-quality assets, there’s really no reason to own Shiba Inu. The bear case for the meme token is much more compelling than the bullish argument. Even though the cryptocurrency is trading well off its peak, investors should avoid Shiba Inu.