What happened
It went up more than 1,000,000% in a matter of months. But this past week was a different story for popular cryptocurrency Shiba Inu (SHIB -0.77%). The dog-themed tokens have fallen 16% since last Friday, as of this writing. The drop resulted from sharply declining trading volume in recent days.
So what
In October, trading volume for Shiba Inu spiked to over $40 billion per day, according to CoinMarketCap.com. That is quite a lot for a cryptocurrency with a market capitalization of around $50 billion at the time. That has tapered off significantly in recent days, with a 24-hour trading volume of $4.0 billion as of this writing.
Image source: Getty Images.
This simply means that traders are less active in Shiba Inu right now than they were a week ago. And a correlated event might explain why. Earlier this month, an unknown person who owns 70 trillion Shiba Inu coins moved over 40 trillion tokens into different wallets. A couple of days later, this person transferred another 20 trillion Shiba Inu coins out of the original wallet. Their intentions are still unknown but they could be making moves in preparation of selling some or all of these tokens, which could spark a Shiba Inu crash.
While the coins bounced back some from the initial crash that resulted from this news, trading volume still hasn't picked back up, suggesting at least some lingering apprehension among traders.
Now what
Of course, even if a Shiba Inu billionaire does sell their holdings, that's just one person's action and opinion. To balance this recent headline out, consider that many cryptocurrency "whales" -- people who own a ton of cryptocurrency -- are buying Shiba Inu, not selling. One such whale is referred to as Gimli. According to Whalestats, Gimli's diversified cryptocurrency portfolio is worth over $84 million and they've been aggressive buyers of Shiba Inu in recent days. Therefore, even if some multi-millionaires are prepping to sell Shiba Inu, others appear ready to buy.
The point is, it's easy to get wrapped up in the headlines. But making financial decisions based on the news of the day is a bad idea. Rather, it's important to always go deeper than the headlines and keep the long term in view. For Shiba Inu investors specifically, they should consider things that could create demand for the cryptocurrency. Next, they should ask whether those demand drivers are sustainable.
Personally, my best guess is that Shiba Inu will struggle to create demand in the long run. Other cryptocurrencies target the same goals and some arguably do it better. But if I'm wrong and Shiba Inu can develop and create sustainable demand, then this past week could look like a mere speed bump in the rearview mirror of future gains.
