As of a decade ago, investing in the stock market was easily the best way to build game-changing wealth. While buying homes, bonds, or gold has worked for short periods of time throughout history, stocks have delivered the highest average annual return of the major investable assets.
But over the past couple of years, cryptocurrencies have knocked Wall Street off of its pedestal, with some digital currencies delivering truly jaw-dropping gains. Perhaps the most surprising of all is meme coin Shiba Inu (SHIB -7.01%).
The Shiba Inu dog breed has inspired a number of popular coins in the crypto space. Image source: Getty Images.
Here's how Shiba Inu gained over 17,300,000% in a little over a year
On Aug. 1, 2020, Shiba Inu made its debut, with SHIB tokens going for $0.00000000051, according to CoinMarketCap.com. However, by Oct. 27, 2021, less than 15 months after its debut, SHIB hit an all-time intraday high of $0.00008841. Though it might be tough to tell with all the zeroes in the way, Shiba Inu galloped higher by more than 17,300,000%! For some context, the benchmark S&P 500 has gained "only" 29,015% since the beginning of 1965 (through Nov. 10, 2021).
Shiba Inu has benefited from a multitude of factors, many of which focus on visibility and building up its community. For example, SHIB's seemingly self-sustaining rise has encouraged more cryptocurrency exchanges to accept Shiba Inu coin for listing. More listings means better liquidity, more awareness of the coin, and a larger overall community. According to Etherscan, almost 941,000 unique wallets now hold SHIB tokens.
To build on this point, decentralized exchange ShibaSwap was launched in July. ShibaSwap helps further improve liquidity and gives hodlers the ability to stake their coins to earn passive income. In other words, it offers an incentive for those who believe in the prospects of Shiba Inu to hang onto their tokens for a long period of time.
Shiba Inu's ascent is also a direct result of Elon Musk's tweets. The world's richest person and head of Tesla Motors adopted a Shiba Inu puppy over the summer, which he named Floki. Anytime Musk tweets about his dog or posts a meme about the Japanese Shiba Inu dog breed, investors take it as a sign to buy.
Coin burn has played a role, too. Initially, SHIB had a 1 quadrillion max token supply. Around half of these coins were sent to Vitalik Buterin, the co-founder of Ethereum. Not wanting the responsibility of holding such a controlling stake, Buterin donated a portion of his SHIB holdings to the India COVID-19 Relief Fund and burned the remaining 90% by sending them to a dead blockchain address. Similar to how share buybacks can help improve the value of each remaining share of stock, coin burn makes each remaining token that much more valuable.
Image source: Getty Images.
Shiba Inu hits the skids: How low can it go?
However, this top-performing cryptocurrency has found its way into the doghouse over a two-week stretch. In the 14 days since hitting an intraday high of $0.00008841, SHIB has retraced all the way back to $0.00004997. For you math-phobes, this equates to a decline of 43%.
The big question is, "How low can Shiba Inu go?"
The answer, if history has any say, is a decline of 93% to 99% over the coming two years.
Although no digital currencies, outside of Bitcoin, have seen the caliber of gains delivered by Shiba Inu, there have been quite a few popular cryptocurrencies which generated life-altering gains in a very short time frame:
- Nano gained 461,575% in less than 10 months.
- NEO catapulted 163,711% in roughly 13 months.
- XRP skyrocketed 62,452% in what amounts to 10 months and a week.
- NEM surged 57,359% higher in nearly 13 months.
- Litecoin sprinted 24,613% higher in a 30-month stretch.
And here's how those same cryptocurrencies fared following their peaks:
- Nano lost 99% of its value in a little over 26 months following its high.
- NEO shed 97% of its market cap in the subsequent 11.5 months.
- XRP declined by 96% in a shade over 26 months.
- NEM lost 98% of its value 13 months after its peak.
- Litecoin dropped by 93% roughly one year after its high.
Jaw-dropping gains in the cryptocurrency space may be far more common than the stock market, but the drawdowns once sentiment shifts can be absolutely brutal.
Image source: Getty Images.
Shiba Inu has other flaws that'll likely contribute to future underperformance
Unfortunately for Shiba Inu coin hodlers, there's more to worry about than just historic precedence. The bigger issue is that Shiba Inu doesn't stand out and has no competitive edge.
The goal with financially focused blockchain is to dramatically increase the speed by which transactions validate and settle, all while reducing costs and democratizing the process to include everyone. While Shiba Inu takes care of this last part, it's not a particularly fast or inexpensive means of conducting a payment transaction. There are a number of popular payment options that settle faster and cost less.
The Shiba Inu use case is also virtually nonexistent. According to online business directory Cryptwerk, a little over 100 businesses worldwide are willing to accept SHIB tokens. Although this has tripled over the past month, it's a drop in the bucket to the more than 32 million businesses in the U.S. and over 500 million entrepreneurs worldwide. The simple fact is this: SHIB has no real-world use case.
And let's not forget that while Shiba Inu's token count won't go higher, it's being constantly diluted by new blockchain projects, some of which will undoubtedly offer more intrigue, faster transaction speed, and/or lower fees.
Once the fear of missing out (FOMO) inevitably wears off for Shiba Inu, it'll be a long ride down.
