For more than a century, no investment vehicle has delivered more impressive returns than the stock market. While equities aren't going to outperform bonds, gold, or housing every year, no other asset comes close to matching the long-term average annual returns of stocks.
But over the past decade, cryptocurrencies have certainly given the stock market a run for its money. A number of digital currencies have delivered jaw-dropping returns in a short time frame, the latest of which is Shiba Inu (SHIB 1.62%). Over a seven-day stretch, Shiba Inu has gained north of 260%, as of Oct. 8, and had pushed into the top 20 largest cryptocurrencies by market cap.
Shiba Inu coin: All bark, no bite
As its name implies, Shiba Inu is a digital meme coin inspired by the Japanese dog breed of the same name. It's also advertised as the so-called "Dogecoin (DOGE 2.12%) killer." Dogecoin was developed in 2013 as a joke that combined two of the trendiest topics of the time: crypto and a Shiba Inu dog meme. But thanks to support from the likes of Elon Musk and Mark Cuban, Dogecoin was able to build incredible momentum earlier this year that sent its token price into the stratosphere. The belief among crypto investors, at least based on what we've witnessed in recent days, is that Shiba Inu could garner the same community effect.
However, the relatively common theme for the vast majority of cryptocurrencies is that they present with no competitive advantages and offer little real-world purpose.
For example, it's no secret that I'm not a fan of Dogecoin. Its transaction fees are notably higher than most popular cryptocurrencies, and transactions on its blockchain are often processed and validated slower than many of its peers. Were this not enough, only 1,714 businesses worldwide have come to accept Dogecoin as a form of payment after eight years. This compares to 32 million businesses in the U.S. and well over 500 million entrepreneurs worldwide. Dogecoin has almost no utility outside of a cryptocurrency exchange.
But if you think that's bad, Shiba Inu's use case is far worse. Even though it chimes in with nearly an $11 billion market value, a meager 43 businesses worldwide accept Shiba Inu as a form of payment, according to online business directory Cryptwerk.
There's little long-term conviction, as well. According to crypto exchange Coinbase, the average investor holding time in Shiba Inu is (drumroll)... six days.
Send Shiba Inu to the doghouse and buy this crypto stock trio
Instead of putting hard-earned money to work on what essentially amounts to a dart throw fueled by Elon Musk's tweets, I'd suggest buying the following trio of cryptocurrency stocks.
For more than a decade, Square's seller ecosystem has been its bedrock. The seller ecosystem provides point-of-sale devices, data analytics, loans, and other tools to merchants to help them succeed. In 2012, $6.5 billion in gross payment volume (GPV) traversed its platform. But in 2021, Square may wind up topping $150 billion in GPV.
While Square's seller ecosystem has always courted smaller merchants, it's also become more palatable to larger businesses. In the June-ended quarter, 65% of GPV in the seller ecosystem came from businesses with $125,000 in annualized GPV. Since most of this segment's revenue is generated from merchant fees, bigger businesses should lead to higher sales and profits.
Where Square gets its crypto ties is via peer-to-peer digital payments platform Cash App. In a three-year period, ended Dec. 31, 2020, Cash App's monthly active user (MAU) count more than quintupled from 7 million to 36 million. Likewise, gross profit per MAU of $55 (as of June 2021) has more than doubled in two years.
Cash App allows Square a number of ways to generate revenue, including merchants fees, bank transfers, and investments, which includes Bitcoin trading and exchange. In the second quarter, $2.72 billion of Square's $4.68 billion in net sales derived from Bitcoin trading/exchange.
Despite its incredible run higher, graphics and networking company Nvidia (NVDA 6.51%) is another crypto stock I'd buy in a heartbeat before I'd put a single penny to work in Shiba Inu.
Nvidia is best-known for its GeForce graphics processing units (GPU) used in personal computers (PCs) and for gaming. Between the pandemic increasing PC sales and the evolution of gaming lifting demand for high-performance GPUs, Nvidia has had little trouble growing its top segment by a healthy double-digit percentage.
This segment is also responsible for fueling the cryptocurrency mining craze. Cryptocurrency miners are people or businesses that use high-powered computers to solve complex mathematical equations. Solving these equations validates groups of transactions (known as a block) on a blockchain as true. For being the first to validate a block, the crypto miner is paid a block reward in tokens of the digital currency being validated. Although crypto-focused GPU's represent a relatively small percentage of companywide sales, the appetite by miners for GPUs has been borderline insatiable.
The other core growth segment for Nvidia is its data center platform. The company's data center solutions are designed for high-performance computing or to enhance machine-learning capabilities within the data center. With more information than ever being moved into the cloud by businesses, it's only logical that Nvidia's GPU's will be leaned on to a greater degree to improve server performance.
Long story short, this growth stock shows no signs of slowing down.
A third cryptocurrency stock I'd buy in a heartbeat over the fad-like Shiba Inu coin is cloud-based e-commerce platform Shopify (SHOP 0.39%).
Whereas most businesses struggled during the initial waves of the coronavirus pandemic, Shopify found itself in the right place at the right time. Prior to the pandemic, businesses were already partnering with Shopify to enhance their online retail presence. But when lockdowns hit across much of the country, online retail demand skyrocketed. Put simply, Shopify has yet to see online retail demand tail off. In the June-ended quarter, over $42 billion in gross merchandise value traversed its network.
What gives Shopify its crypto ties is the ability it's given merchants to accept certain digital currencies as payment, should they choose to do so. Although testing began all the way back in 2019, Shopify rolled out the option of allowing merchants to adjust their settings to accept cryptocurrency last year. While it's unclear how much of a tangible impact this acceptance is going to have on Shopify's growth potential in the near-term, this added choice is another feather in the cap for the leading cloud-based e-commerce platform.
Investors should also appreciate the long-term outlook for online sales. Following $4.28 trillion in global e-commerce sales in 2020, eMarketer is forecasting almost $6.4 trillion in worldwide online retail revenue by 2024. This means nearly 22% of all sales worldwide will come from online purchases within a few years. Shopify is in prime position to benefit from this unstoppable shift.