Historically, the stock market has been one of the surest ways for investors to build significant wealth. Although bonds and commodities are other ways investors can grow their nest egg, none of these alternative investments come close to surpassing the average annual return of the stock market over the long term.
But over the past couple of years, investors have flocked to a new avenue to get rich: cryptocurrencies. Since hitting a pandemic low in March 2020, the market value of all digital currencies has grown 20-fold to $2.84 trillion.
Shiba Inu-themed cryptocurrencies are all the rage in 2021. Image source: Getty Images.
Five reasons Shiba Inu could head higher (even after a 10,800,000% gain)
Of the more than 13,700 available cryptocurrencies, none has had a more impressive run of late than meme coin Shiba Inu (SHIB -1.40%). Since their debut on Aug. 1, 2020, SHIB tokens have galloped from a microscopic $0.00000000051 per token to $0.00005529, as of the late evening on Nov. 7, 2021. For you math-phobes, this works out to a gain of 10,841,076%...in 15 months!
The crazy thing is that Shiba Inu has five additional catalysts that could push it even higher.
1. The prospect of SHIB tokens listing on Robinhood
One of the key factors pushing SHIB tokens higher is the expectation that online investing app Robinhood Markets (HOOD 0.32%) will list Shiba Inu for trading at some point in the not-too-distant future. Listing would make sense given that Shiba Inu has been a borderline top-10 coin by market cap for the past couple of weeks. It would also satiate the more than 450,000 people who've signed a petition for Robinhood to make the move to list SHIB.
Listing on Robinhood would be important for a couple of reasons. It would help to improve liquidity and, more importantly, increase awareness of the coin, which can now be found in more than 925,000 wallets, according to Etherscan.
Image source: Getty Images.
2. ShibaSwap is encouraging longer hold periods
Another upside catalyst for Shiba Inu is the launch of ShibaSwap, which happened in July. ShibaSwap is a decentralized exchange that's helping to improve liquidity and increase interest in Shiba Inu.
Arguably the most important aspect of ShibaSwap is the ability of "hodlers" to stake their tokens to earn passive income. Staking is nothing new in the cryptocurrency space, but it should encourage investors to hang on to their tokens for a longer period of time. For some context, the median holding time for SHIB has doubled from six days to 12 days in three weeks, according to data from Coinbase Global. Though this is still exceptionally low, it's trending in the right direction.
3. Elon Musk tweets Shiba Inu to new highs
Never underestimate the power of Tesla's (TSLA -2.97%) CEO Elon Musk with a smartphone and a 280-character limit on Twitter.
Musk is no stranger to moving the cryptocurrency market with his tweets. He sent Bitcoin (BTC -4.08%) notably higher earlier this year when he announced that Tesla had added $1.5 billion worth of Bitcoin to its balance sheet. He's also pulled the rug out from beneath cryptocurrency investors, such as when he canned Bitcoin as a payment option for Tesla's electric vehicles over the environmental concerns tied to its mining.
Even though Musk doesn't own any SHIB, he did recently adopt a Shiba Inu dog, which he named Floki. He also regularly posts memes containing Shiba Inu dogs. While these tweets represent nothing tangible for the Shiba Inu token, the community nevertheless buys SHIB anytime Musk mentions the breed.
Image source: Getty Images.
4. The fear of missing out proves powerful
Additionally, the fear of missing out, better known as FOMO, is a factor that could certainly push Shiba Inu higher in the short run.
According to software developers' hub Bacancy Technology, Shiba Inu is the third most-searched cryptocurrency on Google in 2021. That's behind only Bitcoin and Ethereum (ETH -4.41%). This interest is in direct relation to Shiba Inu's numerous mentions on social media, its rapidly growing Reddit community, and (of course) its 10,800,000%-plus gain since its inception a little over 15 months ago. Seemingly every cryptocurrency investor is looking for the next Bitcoin, and they've demonstrated a willingness to chase highfliers to achieve big returns.
5. Few avenues exist to bet against SHIB
Lastly, there's an inherent buy bias throughout much of the cryptocurrency space.
For example, it's relatively easy for investors to short-sell a stock or perhaps use options as a way to bet on the future downside of a security listed on a major stock exchange. But with the exception of Bitcoin and Ethereum, there aren't any true derivatives that can be used to bet against digital currencies.
Also, while short-selling is available on some cryptocurrency exchanges for a small handful of digital currencies, it isn't a widely used tool, especially considering the incredible volatility seen in the cryptocurrency space. Without active short-sellers, there's a natural bias that pushes Shiba Inu higher.
Image source: Getty Images.
The single biggest reason to avoid Shiba Inu
There's no question that upside catalysts for Shiba Inu do exist. However, there's a gigantic flaw with it that should encourage investors to avoid this coin at all costs. That flaw is its complete lack of competitive advantages.
To put it mildly, Shiba Inu might be popular with the retail crowd, but it doesn't do anything particularly well. For instance, it is an ERC-20 token that's based on the Ethereum blockchain. Ethereum's network is popular and prone to congestion, which limits its processing capacity to about 13 transactions per second. There are numerous payment coin projects executing more efficiently than Shiba Inu.
There's also no competitive edge when it comes to real-world use. To be fair, nearly all digital currencies lack a real-world use case. However, SHIB is especially noteworthy. That's because we don't often see a top-10 cryptocurrency (SHIB has vacillated between No. 9 and No. 11 for the past week) have so little real-world application. Online business directory Cryptwerk only lists 110 merchants as willing to accept SHIB tokens, as of Nov. 7.
Without any true advantages or competitive edges, it's highly unlikely that Shiba Inu will avert a mammoth correction following its more than 10,800,000% increase. History is quite clear that life-altering gains in the cryptocurrency space are eventually met by monster pullbacks.
