It's been an amazing year for the investment community. Housing prices have soared and the benchmark S&P 500 has hit five dozen record-closing highs in 2021.
But these gains pale in comparison to the upside we've witnessed in the cryptocurrency space since the coronavirus pandemic hit 20 months ago. The total value of all digital currencies has grown from $141 billion to $2.71 trillion, according to CoinMarketCap.com. One of the key tokens leading that charge is meme coin Shiba Inu (SHIB +0.03%).
Crypto investors have had an insatiable appetite for Shiba Inu-inspired coins in 2021. Image source: Getty Images.
Explaining Shiba Inu's historic 17,000,000% gain in 15 months
Shiba Inu made its debut on Aug. 1, 2020. In less than 15 months, it rocketed its way into the top 10 of all cryptocurrencies by market cap and sported a valuation in excess of $30 billion. At its peak, we're talking about gains of better than 17,000,000% in just over a year. Put into context, a $10 investment on its debut day would have made you a millionaire, based on its all-time high of $0.00008841 per SHIB token.
This historic gain in SHIB is a function of numerous factors. For example, as Shiba Inu rose the ranks and became more valuable, a growing number of cryptocurrency exchanges listed SHIB for trading. As access to Shiba Inu coin has increased, so has the size of the community. Approximately 872,000 digital wallets owned a stake in Shiba Inu, as of last week.
SHIB tokens have also ridden the wave higher following the launch of ShibaSwap four months ago. ShibaSwap is a decentralized exchange that allows for "hodlers" to stake their coins and earn passive income. The key catalyst here being the incentive for SHIB investors to hang onto their tokens for an extended period of time.
And, of course, no discussion of Shiba Inu is complete without mentioning the role Tesla Motors' CEO Elon Musk has played. Even though SHIB tokens aren't in the digital wallet of the world's richest person, Musk did recently adopt a Japanese Shiba Inu-breed dog, which he named Floki. Anytime Musk tweets about his dog or posts a meme containing a Shiba Inu, investors treat it as their cue to pump up the price of SHIB tokens.
Image source: Getty Images.
Shiba Inu does this better than 99.9% of all cryptocurrencies...
But there's something else that's propelled SHIB higher, which Shiba Inu does better than virtually any other cryptocurrency in existence: Create social media buzz.
Whereas investor emotions and the fear of missing out (FOMO) have limited potential with regard to stock prices, the cryptocurrency space has been a different beast entirely. If a digital currency can generate enough sustainable buzz in the short term, hodlers can enjoy historic gains. There have been quite a few four-, five-, and six-digit percentage gains in the crypto arena in under a three-year time frame. Or, in Shiba Inu's case, a 17,000,000% gain in just shy of 15 months.
According to a report from Bacancy Technologies, Shiba Inu has averaged 2.8 million searches per month on Google, a division of Alphabet, in 2021. That's the third most searches per month of the more than 13,600 cryptocurrencies in existence, trailing only Bitcoin (BTC +0.42%) at 22 million searches per month, and Ethereum (ETH +2.22%) with 6.3 million monthly Google searches.
What's more, Shiba Inu's online community has grown at an astounding pace. Online chat and sharing community Reddit has seen the number of members for r/SHIBArmy grow to 410,000, as of this past weekend. Although this is only about 20% the size of the Reddit Dogecoin community, Dogecoin has had a seven-year head start on Shiba Inu.
What this data demonstrates is that social media has been effectively used to create a buzz around SHIB that's led to substantially higher price points and nothing short of FOMO from some cryptocurrency investors.
Image source: Getty Images.
But there's a catch!
However, there's a catch to this success.
The thing about social media buzz and community-building in the crypto space is it can only carry a digital currency so far before investors start looking for lasting competitive advantages. In Shiba Inu's case, it lacks any true differentiating factors to support its monstrously high valuation. This is to say that nothing stands out about Shiba Inu's processing times or transaction fees.
Beyond its lack of competitive differentiation, Shiba Inu has other factors working against it. As an example, the median hold time on leading cryptocurrency trading platform Coinbase is only 11 days. That compares to median hold times of closer to three months for the likes of Bitcoin, Ethereum, and Litecoin. Even with staking ability, the vast majority of SHIB hodlers look to be in it for a quick trade and nothing more.
History provides another reason for hodlers to be concerned. Last week, I examined the performance of a trio of payment coins that enjoyed five-and-six-digit percentage run-ups in a relatively short time frame. All three digital currencies eventually declined by 93% to 99% after hitting their peak. While it's impossible to tell when the buzz surrounding SHIB will fade, history is quite clear that historic upside will almost certainly be followed by an epic correction.
For now, Shiba Inu is creating a self-sustaining social media buzz. But when push comes to shove, it's not a token that offers game-changing potential or has a real-world use case.
