Looking back more than a century, no investment vehicle has been relied on more consistently to build wealth than the stock market. Even with double-digit corrections being commonplace on Wall Street, stocks have outpaced bonds, gold, and other commodities in terms of average annual return over the long run.

But over the past couple of years, we've witnessed a major shift in outperformance. In particular, cryptocurrencies have left stocks eating their dust, perhaps none more so than the ultra-popular Shiba Inu (SHIB -1.12%).

A Shiba Inu-breed dog sitting on a couch.

Investors can't get enough of Shiba Inu-themed coins. Image source: Getty Images.

Shiba Inu's path to a 17,300,000% gain

Back on Aug. 1, 2020, Shiba Inu coin made its debut, with CoinMarketCap.com noting a price of $0.00000000051 that day. Keep in mind that the initial maximum coin supply was set at 1 quadrillion tokens, hence the really low per-token price. But by Oct. 27, 2021, SHIB hit what's currently an all-time intraday high of $0.00008841 per token. It might be tough to do the math with all these zeroes getting in the way, but we're talking about a gain in less than 15 months of 17,335,194%. That's a life-altering increase for early investors.

There is a laundry list of reasons Shiba Inu has gone to the moon.

To begin with, the community is growing. As of Nov. 3, more than 872,000 wallets owned a stake in Shiba Inu. Over the past 15 months, there have been an increased number of cryptocurrency exchanges that have listed SHIB for trading. This is boosting awareness of the coin and growing the community.

To build on this point, cryptocurrency investors have seen the 7,700,000,000% gains in Bitcoin since July 2010 and want to find the next coin that can duplicate such an impressive move higher. It's not uncommon for young investors in the cryptocurrency space to be driven by the fear of missing out (FOMO).

"Hodlers" have also taken their cue to buy from Tesla CEO Elon Musk, who recently adopted a Shiba Inu-breed dog. Anytime Musk tweets about his dog, Floki, or posts a meme referencing Shiba Inu's, investors have used it as their FOMO catalyst to send SHIB higher.

As for something a bit more tangible, the launch of ShibaSwap in July looks to be providing some modest lift. ShibaSwap is a decentralized exchange that allows investors to stake their coins to earn passive income over time. They key here being that it encourages investors to hold onto their SHIB, which could lessen some of the wild price vacillations we've witnessed.

A visibly worried person looking at a plunging crypto chart on their computer monitor.

Image source: Getty Images.

Uh-Oh: SHIB falls 50% in a little over a week

But even top-performing assets hit the skids, as Shiba Inu hodlers are finding out. On Nov. 4, just a little over a week after hitting its all-time high, SHIB tokens dipped to an intra-day low of $0.00004340. That's a decline of almost 51%.

Why the sudden implosion?

One reason, as reported by my colleague Jon Quast, is the possibility of a Shiba Inu whale cashing out. Back when SHIB made its debut in August 2020, an investor acquired 70 trillion tokens, which was worth about $8,000 at the time. This investment increased in value to more than $5 billion at SHIB's peak. Recently, this accountholder transferred an aggregate of 40 trillion SHIB tokens to four separate web addresses. This has some folks believing this early investor may be looking to cash out some or all of his or her position.

To add to this point, profit-taking might be on the minds of more than just one whale. With the Biden administration discussing the possibility of capital gains tax changes for the well-to-do, some investors might be inclined to cash out now when their tax status is concretely known, rather than chance paying a higher capital gains rate at some point in the future.

History also provides precedence for the decline. There have been multiple payment coins that have delivered four-, five-, and six-digit percentage gains in the cryptocurrency space over the past couple of years. In virtually all of these instances, we saw these payment coins in question go on to lose 90% or more of their value after hitting their respective peak.

Silver dice that say buy and sell being rolled across a digital screen displaying charts and volume data.

Image source: Getty Images.

Shiba Inu: To buy or not to buy?

With Shiba Inu now halved from its high, as of Nov. 4, the question folks are probably asking is, "Should I buy?" The answer remains a very firm no.

Though there have been no shortage of catalysts that have pushed SHIB higher, there's an equally long list of reasons to be worried about Shiba Inu's valuation.

To begin with, payment coins need a use case to be successful. According to online business directory Cryptwerk, only a hair over 100 merchants worldwide are accepting SHIB as a form of payment. That's an exceptionally low figure for a token that briefly surpassed Dogecoin (DOGE -0.47%) in market cap. For some context, Dogecoin is accepted by more than 1,700 merchants, which is itself a really small figure, but notably higher than Shiba Inu. Beyond a cryptocurrency exchange, Shiba Inu has virtually no use.

Another warning sign is the length of time investors are hanging on to their SHIB. Leading cryptocurrency exchange and ecosystem Coinbase lists Shiba Inu's median hold time at just 11 days. Although turnover in the cryptocurrency space is considerably higher than in the stock market, most popular tokens are held for 30 to 90 days. Even with the ability to stake their coins via ShibaSwap, investors aren't sticking around for long.

The lack of a barrier to entry in the cryptocurrency space is also constantly diluting the value of FOMO-driven coins like Shiba Inu. With more than 13,600 cryptocurrencies now available, according to CoinMarketCap.com, there's a steady diet of blockchain innovation. While many of these projects will fail to live up the hype, quite a few will stand out over the long run. As for Shiba Inu, it possesses no true competitive advantages.

SHIB has been a retail favorite for more than a year, but it probably has much more downside to come.