Since the dawn of the 20th century, there arguably hasn't been a more tried and true method to build wealth than putting your money to work in the stock market. Stocks won't outpace housing, gold, or bonds every year, but over the long run, no asset class has come close to matching the average annual gains of equities.
The short-term is a different story.
Since the trough of the coronavirus pandemic in March 2020, the market value of cryptocurrencies has soared. Whereas the benchmark S&P 500 has gained a little over 100% since March 2020, the aggregate value of all digital currencies has grown from $141 billion to nearly $2.9 trillion. That's a greater than 20-fold increase in about 20 months.
Although interest in cryptocurrencies just about couldn't be higher, not all digital tokens are worth investing in. In fact, the following trio of cryptocurrencies are likely headed to the doghouse and should be avoided like the plague in November.
The first cryptocurrency investors should actively avoid is the hottest digital currency on the planet, Shiba Inu (SHIB -5.78%). This popular meme coin has gained over 11,000,000% (not a typo!) since its debut on Aug. 1, 2020.
Seemingly everything has worked in Shiba Inu's favor over the past year and change. For instance, a growing number of cryptocurrency exchanges have listed SHIB for trading. This has helped pushed the number of unique wallets holding Shiba Inu coin above 925,000 and boosted awareness.
There's also the launch of ShibaSwap four months ago. This decentralized exchange allows "hodlers" to stake their coins to earn passive income, as well as helps boost liquidity for the SHIB community. The key here being that ShibaSwap could help lengthen the holding period for Shiba Inu investors.
But there are also some glaring problems with Shiba Inu that can't be ignored. In no particular order:
- Shiba Inu offers virtually no real-world utility. Even though the same could be said for 99.9% of all digital currencies, SHIB's lack of use is particularly glaring with it straddling the top 10, in terms of crypto market cap. Only 112 merchants accept SHIB tokens, according to online business directory Cryptwerk.
- The median hold time for Shiba Inu is only 13 days, per Coinbase. This clearly shows SHIB is attracting swing traders and not the buy-and-hold investors needed to support an 11,000,000% move higher.
- History clearly shows that five-and-six-digit percentage moves higher in the crypto space are eventually met with mammoth corrections.
- Shiba Inu has no competitive edge. There's nothing specific about its processing times or transaction fees that makes it worth using over other payment coins.
Long story short, this fad coin is likely going to lose a lot of its value in the weeks, months and years that lie ahead.
A second cryptocurrency with little "paw-tential" that should be avoided like the plague in November in Floki Inu (FLOKI -9.31%). That's right, another coin that's skyrocketed in value and is inspired by the Japanese Shiba Inu dog breed.
Over the past four months, FLOKI tokens have increased in value by more than 6,500%, as of Nov. 9. The core catalyst looks to be Tesla Motors' (TSLA 2.28%) CEO Elon Musk. Musk is no stranger to influencing the crypto market with his tweets and his Shiba Inu-themed memes. However, there's special precedence to Floki Inu given that the world's richest person adopted a Shiba Inu dog over the summer that he named Floki. Anytime Musk posts about his dog or the Shiba Inu breed, FLOKI hodlers take it as their cue to buy.
On a more tangible level, Floki Inu is aiming to differentiate itself with three projects. According to its whitepaper, it aims to create a non-fungible token (NFT) gaming metaverse that'll be known as Valhalla, a merchandise marketplace known as FlokiPlaces, and an education platform named Floki Inuversity. Floki Inu is also partnered with Elon Musk's brother, Kimbal Musk, on the Million Gardens movement, which will address global hunger issues.
If you simply read the whitepaper, you'd think the developers have a winner. But the reality is that Floki Inu has no more utility than Shiba Inu or virtually any other dog-themed cryptocurrencies. There are well over 500 million entrepreneurs worldwide, and the best the whitepaper can muster up is a partnership with CryptoCart that gives holders access to around 1,700 stores.
Aside from minimal utility, there doesn't appear to be any connection whatsoever between Elon Musk and the FLOKI development team. Though they are working with Musk's brother, the draw for investors is the Tesla CEO himself.
To boot, as pointed out by my colleague Will Ebiefung, Floki Inu has launched a large, aggressive advertising campaign in the U.K. to increase awareness of the coin. But according to Financial Times, this campaign may draw the ire of U.K. regulators.
Long story short, Floki Inu is riding a wave of hype centered on Shiba Inu-themed coins, but it's yet to bring anything authentic or differentiating to the table.
To make this a Shiba Inu-themed trifecta, the third cryptocurrency to avoid like the plague in November (and frankly, well beyond) is Dogecoin (DOGE -3.78%).
Before Floki Inu even made its debut in June, Dogecoin was tugging at crypto investors' heartstrings. During a six-month stretch between early November 2020 and early May 2021, Dogecoin galloped higher by a little over 27,000%. For some context, this represented a larger gain than what the S&P 500 had delivered for investors since the beginning of 1965.
Not to sound like a broken record, but the core catalyst here is, again, Tesla CEO Elon Musk. Musk has referred to himself as the "Dogefather," and he does own DOGE tokens in his crypto portfolio. In fact, Musk has previously tweeted that he's working with Dogecoin's development team to improve the transactional efficiency of the coin.
Unfortunately, there is a laundry list of reasons to avoid Dogecoin, even with Musk's ownership and tweet-based enthusiasm for the coin. For instance, Dogecoin's transaction fees are substantially higher than most popular cryptocurrencies. Additionally, transactions on its blockchain settle and validate slower than a number of payment coins.
Similar to SHIB and FLOKI, there's also an underwhelming use case. According to Cryptwerk, a little over 1,900 businesses accept DOGE as a form of payment. That's a lot more than SHIB, but DOGE has had a seven-year head start. However, relative to the total number of businesses in existence, only a microscopic fraction have opened their arms to DOGE.
To key theme here is that none of these projects provide any real differentiation or edge that will help them stand out over the long run. They're popular because of Elon Musk's tweets and the hype surrounding the Shiba Inu breed. Unfortunately, neither of those factors represents a sturdy investment thesis.