Shiba Inu (SHIB 3.41%) is the latest cryptocurrency to take the investing world by storm. Its price has soared by a phenomenal 86,489,545% over the past year, and it's up nearly 100% over the last 30 days alone.
Those types of returns can make Shiba Inu a tempting investment. But there's more to cryptocurrency than just its price, and there are a few factors to consider before you buy. While there's one good reason to consider buying Shiba Inu, there are two reasons you may want to pass on this one.
Image source: Getty Images.
Why consider investing in Shiba Inu?
1. You have some extra cash and are willing to take a gamble
While all cryptocurrency is volatile, Shiba Inu is an especially high-risk, high-reward type of investment. Its price has skyrocketed in recent weeks, and there's a chance it could fall just as quickly.
However, nobody knows exactly when or if its price will crash. At the rate its price is increasing, if you invest now, you could potentially make a bit of money before the inevitable fall. If you have cash to spare and are willing to risk it to make some short-term profit, you may choose to invest in Shiba Inu.
Keep in mind that Shiba Inu remains an incredibly risky investment, so it's wise to think of it as an experiment rather than a surefire money-maker. Don't invest more than you can afford, because there's a good chance you'll lose money. But if you're willing to take that risk, there's no harm in putting a little cash toward this investment.
Why it may be better to invest elsewhere
1. Its fundamentals don't align with its explosive growth
Although Shiba Inu has earned astronomical returns lately, those earnings have more to do with the hype surrounding the cryptocurrency rather than its underlying fundamentals.
The primary reason for Shiba Inu's price increase is its large community of followers. These investors have bought the cryptocurrency in droves, sending up its price. The more people invest, the higher its price climbs, and the more money these investors can potentially make. Eventually, though, these investors will sell their tokens to cash in on their earnings, and the price will plummet.
Because Shiba Inu doesn't have much real-world utility at the moment, it will likely struggle to stay afloat after its followers sell their tokens and move on to a different investment. It's very likely its price will crash eventually, and once that happens, it may not be able to bounce back.
2. It's a short-term investment, and timing the market is risky
Short-term investments like Shiba Inu have the potential to make a lot of money over weeks or months, but once they crash, they typically crash hard. To make money with this type of investment, then, you'll need to buy before the price surges, then sell just before it drops.
While this may sound simple in theory, it's nearly impossible in practice. Nobody knows how long Shiba Inu's run will last, and if it begins to crash, its value could plummet over a matter of days. If you wait just a day or two too long to sell, you could potentially lose a lot of money.
A much safer way to make money is to buy healthy investments and hold them for the long term. This strategy may be considerably less exciting than buying short-term investments like Shiba Inu, but it's much safer and you're more likely to make money over time.
Shiba Inu may be an exciting new cryptocurrency, but it can be dangerous. If you choose to invest, make sure you're fully aware of what you're getting into. For most investors, though, there are better (and safer) options out there that could help you make more money with considerably less risk.
