For more than a century, the stock market has been a money machine for investors. Although it's not the top-performing asset class year in and year out, it has outpaced all other asset classes over the very long term.
But over the past couple of years, some of the world's most popular cryptocurrencies have left the stock market eating their dust. Perhaps none is a better example than meme coin Shiba Inu (SHIB 0.54%), which pushed its way into the top 10 largest digital currencies by market cap last week.
The Shiba Inu dog breed is the inspiration behind the Shiba Inu coin. Image source: Getty Images.
Shiba Inu's 15-month gains have been nothing short of jaw-dropping
To give you some idea of how well Shiba Inu has performed, here's a side-by-side comparison of the SHIB token to the benchmark S&P 500 since Aug. 1, which is when Shiba Inu made its trading debut:
- S&P 500: up 41%
- Shiba Inu: up 12,733,233% (based on a price of $0.00006494)
These are life-altering gains. If someone had the wherewithal, luck, and stomach to buy $10 worth of SHIB on Aug. 1, 2020, they'd have had $1.27 million, as of this Oct. 30.
These historic gains in SHIB can be boiled down to a handful of factors. For starters, it can't be overlooked that the market dynamics for cryptocurrencies are nothing like the stock market. While some of the biggest digital currencies can be short-sold, it's very difficult to bet against most cryptocurrencies. This creates a buy bias that's fueled big gains in some well-known digital currencies, including Shiba Inu.
Shiba Inu investors have also benefited from SHIB's being listed on a growing number of cryptocurrency exchanges. The more avenues crypto investors have to buy SHIB, the more likely it is that the community and overall adoption will increase.
And, as you can probably imagine, Tesla Motors CEO Elon Musk has played a role. Even though Musk doesn't own any SHIB tokens, he did recently adopt a Shiba Inu-breed dog named Floki. Anytime Musk references his dog or posts a meme on Twitter concerning the Shiba Inu dog breed, investors take it as their cue to buy Shiba Inu.
Image source: Getty Images.
This data point says Shiba Inu is in big trouble
Though Shiba Inu can seemingly do no wrong of late, one number clearly implies that it's headed for disaster.
Given the volatility inherent in the cryptocurrency space and a lack of tangible catalysts for a vast majority of digital currencies, median holding periods tend to be a lot shorter than what we'd see for stocks. According to cryptocurrency exchange and ecosystem Coinbase, here are the median holding times for some of the most-popular digital currencies, as of Oct. 30:
- Litecoin: 97 days
- Bitcoin: 79 days
- Ethereum: 79 days
- Cardano: 68 days
- Dogecoin: 50 days
- XRP: 31 days
As you can see, median "hodlers" are hanging around from one to three months for these widely owned digital currencies.
But this isn't the case for Shiba Inu. Coinbase notes that the median hold time for SHIB is only 10 days. What's particularly unnerving about this number is that decentralized exchange ShibaSwap was launched more than three months ago. With Shiba Inu hodlers having the ability to stake their coins to earn interest, we'd expect to see this median hold time rise considerably. The fact that it hasn't suggests two things. It implies that emotion-driven day-traders are running this show and, secondly, suggests that investors are taking their profits and looking elsewhere.
Maybe the bigger takeaway from this menial 10-day holding period is that conviction in SHIB's long-term prospects as a payment coin aren't as high as you might think.
Image source: Getty Images.
SHIB lacks a competitive edge
Then again, Shiba Inu's exceptionally short median holding period is far from its only issue.
For instance, SHIB has demonstrated virtually no utility outside a cryptocurrency exchange. Online business directory Cryptwerk lists only around 100 merchants globally that are willing to accept SHIB tokens. That's an astonishingly low number for a payment-focused coin ranked as the ninth largest cryptocurrency. The fact is, Shiba Inu has no real-world utility.
Making matters worse, Shiba Inu doesn't offer any competitive advantages. There are more than 13,000 cryptocurrencies available for trade, according to CoinMarketCap.com, and new blockchain projects are being introduced weekly. Aside from emotion- and momentum-driven gains, there's nothing about Shiba Inu's processing speeds, network capacity, or transaction fees that helps it stand out in a positive way from other payment coins. In fact, I recently highlighted a couple of cryptocurrencies that offer faster transaction processing times at a lower cost.
And don't overlook history, either. Anytime a cryptocurrency has delivered life-altering gains in a short time frame, we've watched that digital currency eventually pull back by 90% or more. History may not repeat, but it often rhymes.
No matter how you slice it, Shiba Inu is in trouble.
